Little-Known Tax Perk Could Get Your Household Up to $2,000 from the IRS!

Little-Known Tax Perk Could Get Your Household Up to $2,000 from the IRS!

One of the fiscal perks of the U.S. Tax Code is the Retirement Savings Contributions Credit, or simply “Savers Credit,” which basically pays a dollar-for-dollar non-recourse credit of up to $1,000 (or $2,000 for married filing jointly) to certain taxpayers for retirement savings. 

Obviously, this could be a pretty sweet deal for those who are eligible because it’s a direct dollar-for-dollar reduction in taxes which could wipe out any tax owed – down to zero. But most of those who qualify aren’t even aware that any such thing exists – not that I’m blaming them, though. In fact, a recent study by the TransAmerica Center for Retirement Studies found that only 12 percent of those households earning less than $50,000 a year were aware of this valuable perk.

Interestingly enough, whenever this comes up during one of the Continuing Professional Education courses we offer, you’d be lucky to find more than a couple – literally speaking, here – in a roomful of retirement/financial professionals who knows about the Savers Credit. Seems fair to unload some responsibility for the lack of awareness here, doesn’t it?

* You must be at least 18 years old.

* You must not be a full-time student.

* No one else may claim a dependent exemption for you on their tax return.

* Your AGI may not exceed certain limits, depending on your filing status.

 

Depending on your AGI and filing status, the credit is calculated as one of three percentages (10 percent, 20 percent, or 50 percent) of the first $2,000 that you contribute to your 401(k), 403(b), 457, SEP, traditional IRA, or even Roth IRA. Thing to note here is that you receive this credit only on “your own” contributions, not any portion of your employer’s contribution.

Like most tax stuff, the AGI thresholds change frequently. For the 2012 tax year, you’d get:

Amount of Tax Credit	Single, Married Filing Separately, or Qualified Widow/er	Head of Household	Married Filing Jointly
50 %	AIG up to $17,250	AIG up to $25,875	AIG up to $34,500
20 %	AIG between $17,251 and $18,750	AIG between $25,876 and $28,125	AIG between $34,501 and $37,500
10 %	AIG between $18,751 and $28,750	AIG between $28,126 and $43,125	AIG between $37,501 and $57,500

As you can tell, the lower the income, the higher the credit because it is intended to help low- to moderate-income taxpayers who save for retirement.

Here are a couple final key points. Even if you’re already retired, collecting a pension, and saving money in, say, a Roth IRA, you can still claim this credit, insofar as you meet the income and dependent requirements. Also, it is extremely critical to note that this credit is not available to folks who use Form 1040-EZ to file. To claim the Savers Credit, you must use the 1040, 1040-A, or 1040-NR form.

 

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 Do you have questions or concerns about your finances and retirement investments? Call us today at  877.656.9111  or visit us on the Web to schedule your no-strings-attached consultation!

Are You Leaving Social Security Money on the Table?

Are You Leaving Social Security Money on the Table?

When it comes to maximizing Social Security benefits, many – sadly including so-called financial advisors – are under the wrong notion that there are only two basic options: (1) collecting at early retirement or (2) waiting until full retirement age (FRA). As this complimentary special report shows, whether you’re married, divorced, or widowed, you have several options and strategies that could get you more money than you might imagine.

How is that possible when you’re not even aware of all your options in the first place? Or even worse, when your advisor is one of the many who doesn’t know what he or she doesn’t know in this regard?

Deb’s retirement advisor is a trusted family friend she’s known and worked with for years. She’s looking forward to retiring in eight months when she turns 66. Her advisor has determined that between Deb’s pension and Social Security, she’ll be OK, so she really didn’t see any need to seek a second opinion. However, her coworker strongly encourages her to do so – after all, it’s complimentary! So she reluctantly makes an appointment to see yours truly.

During our meeting, I discover that, although currently single, Deb was married for nearly 35 years – and that’s the game changer! Wondering why? Her financial advisor was completely wrong in thinking she could only – and therefore  must – apply for Social Security benefits based on her “own” work record. The thing is, she also qualifies for benefits based on her ex-husband’s work record. Yes, and it’s completely legal!

In this particular instance, such a move is even better, because her ex-husband earned so much more money that it turned out her monthly benefit would be almost $300 more than if she based her claim on her own record.

And it gets better still! By going this route – and getting more income now – Deb also has the opportunity to earn “delayed retirement credits,” which increases her “own” benefit amount by 8% a year for the next four years, until she reaches age 70. As the math turns out, at that time, she will switch from her current claim to her “own” much larger maximum benefit. Yes, that’s right: she gets more today, and even much more at age 70 and beyond.

By the way, all of this is completely legal, totally acceptable, and will not affect her ex-spouse and his new wife’s benefits in any way. Not too shabby, right?

To be clear, I don’t expect every financial advisor to become a Social Security expert. However, given the role that Social Security benefits play in retirement, is it too much to ask that every so-called retirement consultant have some basic knowledge of all the possible options?

Of course, everyone’s situation is different. But are you sure you’re aware of ALL of your options when it comes to maximizing Social Security payouts, not just for yourself, but for your immediate family as well? You can start by downloading a complimentary copy of my special report.

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 Do you have questions or concerns about your finances and retirement investments? Call us today at  877.656.9111  or visit us on the Web to schedule your no-strings-attached consultation!

Dear Tax Preparers, Stop Misleading Us!

Dear Tax Preparers, Stop Misleading Us!

All tax preparers (and/or tax preparation software) are not created equal. And in a free market society, one should expect fierce competition as preparers attempt to differentiate themselves. However, that doesn’t and shouldn’t mean stretching the truth or duping the folks they purport to serve with bogus information.

If you’ve paid attention, most of the advertising seems to suggest that if you employ “them” or use “their” software, you will somehow get “more” money back – money you wouldn’t otherwise receive. Is this really true?

One particular ad got my attention – in a negative way. It features a lady who claims to have read the entire ObamaCare Act and is therefore so familiar with it that she will (in this case, it’s her company and their software) “save” her clients money “this year” (i.e., on their 2012 tax returns). I’m singling this one out because it’s such a stretch!

Not that I’m an expert on ObamaCare by any measure, but I don’t know of any aspect of that law for which we are filing taxes on “this year” – 2012. In early January, I attended a workshop organized by the Maryland Society of Accountants on the ins and outs of this law. What was unique about this particular workshop compared to all the others I’ve attended on this subject is that it was led by three esteemed attorneys, one of whom is the nation’s foremost expert on healthcare law.

Guess what? He’s still trying to decode all the ramifications of the "Affordable Care Act." In fact, the IRS is still developing the framework, writing the tax rules, and getting things ready for the 2013 tax season, by which time this law will really have kicked in. Which leaves one to wonder what, exactly, the lady in that ad might be talking about – and as a result makes it a very bogus ad.

Of course, tax prep is a crowded field, and the bigger one’s market share in any industry, presumably the better. But shouldn’t we at least begin with candidness? While an experienced preparer who knows what they’re doing will make a difference, by and large, there’s absolutely no magic that will give you more money than is legally due you under IRS rules – unless you and/or your preparer are willing to commit tax fraud.

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 Do you questions or concerns about your finances and retirement investments? Call us today at  877.656.9111  or visit us on the Web to schedule your no-strings-attached consultation!

Will You Run Out of Retirement Money/Income?

Will You Run Out of Retirement Money/Income?

Most of us have never paused to think about this possibility either because we know that we are indeed set, or we are, quite frankly, simply naïve. As much as I might hope the latter is never the case, study after study tells us: 

The foremost issue facing today’s retirees is outliving one’s money.

In a sense, this is not entirely shocking, given the near extinction of defined benefit plans. It used to be that you went to work and upon retirement, the corporation gave you lifetime income – in most cases these benefits extended to your spouse after your death. However, I think the fact that so many Americans today are exposed to the dreadful possibility of outliving their money (more so than any other time in our history) should cause us to investigate other possible causes, beyond the erosion of corporate pensions.

Here’s what I’m thinking: Most of us plan for retirement all of our working lives by following the advice of our financial counselors with the goal of specifically preventing this fate. Yet more and more folks seem to be staring outliving their savings right in the face. Might the issue be that they are receiving substandard advice? Is it possible that this has actually been the situation all along, but it’s becoming more apparent now because guaranteed employer pensions have gone the way of the dinosaurs? Given the cases I’ve seen – and continue to see daily – in our practice, I tend to believe that bad advice could be the culprit in more cases than not.

You see, I think many so-called advisors tend to be very myopic, focusing retirement plans on “accumulation” only, with little to no emphasis on whether that pot of money will actually be able to accomplish its intended purpose: provide lifetime income (keyword: lifetime). What use is all those years of saving and investing if, in the end, you’re not guaranteed that it will produce the necessary results?

I hope you can emphatically point to something in your retirement arsenal that specifically guarantees you’ll never run out of income/money, versus simply hoping that doesn’t happen to you. The thing is, true retirement security is possible, and it’s much easier than most would think. If you’d like to know how to incorporate such a guarantee into your retirement strategy, this free special report might be of interest to you. 

Good luck, and have a happy retirement!

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Have other questions about your retirement investments? Call us today at  877.656.9111  or visit us on the Web 

New Limit on Medical Expense Deduction

Here’s a recent query we received and the answer we provided:

Q: I make only $50,000 a year and have a medical condition that costs me between $4,800 and $5,000 every year. My tax guy tells me that I’ll no longer be able to claim any portion of my medical expenses on my itemized deductions. Could you clarify why?

Sincerely,

Danica R.

A: I believe your tax guy is talking about one of the tax law changes that resulted from the new health care law – affectionately known as “ObamaCare.” To break it down, let me give you a general idea about the before-and-after effects, so to speak.

Through the 2012 tax year, if you itemize deductions on your federal tax returns, one of the things you’re able to claim is the portion of your qualified unreimbursed medical expenses that exceeds 7.5 percent of your Adjustable Gross Income (AGI). Assuming that your AGI is $50,000, as you indicated, 7.5 percent would be $3,750. Therefore, if your unreimbursed medical expenses were $4, 800 you could deduct $1,050 ($4,800 minus $3,750), the portion that exceeds 7.5 percent of your AGI. Likewise, if your expenses were to total $5,000, you’d be able to deduct $1,250 ($5,000 minus $3,750).

Here’s how things change with the new ObamaCare rule, beginning in 2013. You are allowed to deduct the amount that exceeds 10 percent of your AGI (instead of the 7.5 percent of prior years). So given an AGI of $50,000, 10 percent would be $5,000. Therefore, you would be able to deduct only the portion of your qualified unreimbursed medical expenses that exceeded $5,000. Since your medical costs range from $4,800 to $5,000 a year, you would effectively lose the deduction of $1,050 to $1,250 that you were receiving through 2012.

I must mention, however, that for those tax filers aged 65 or older, this new rule doesn’t kick in until 2017. For those younger than that age, it begins in 2013.
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Have other questions about how changes in the tax law will affect your 2013 filing status? Call us today at  877.656.9111  or visit us on the Web to schedule your complimentary, confidential consultation with experienced financial professionals who can help you make the most of your investments and plan for a secure retirement that takes all the pieces into account.

How to Keep Your Retirement Assets Out of Congress’ Reach

How to Keep Your Retirement Assets Out of Congress’ Reach

As I explained in my last column, from my vantage point, the recent “fiscal cliff” deal amounted to tax increases on the rich, middle class, and poor alike. As you may remember, the whole idea was to tackle – in a meaningful way – our federal debt/deficit problem. So here’s the simple question: Was that goal accomplished? The straightforward answer is: Not even close!

So what’s next? Could more tax increases be coming down the pipe? If that were to happen, would your retirement income be crushed? Interesting questions, aren’t they? I think smart financial advisors (and investors) should be having these discussions right now, if they have not already. Wouldn’t you agree?  

You see, under existing IRS rules, your income could be either taxable or nontaxable. As the names imply, taxable income is 100 percent taxable, but you pay zero tax (as in nothing!) on nontaxable income (read the next words slowly) regardless of how much of it you earn. That’s almost unbelievable, isn’t it? However, as some like to say, the law IS the law.

From the way things are looking in Washington, D.C., if you have money sitting in yet-to-be-taxed 401(k)s, IRAs, 403(b)s, or whatever they might be, you’d be wise to visit with a savvy advisor who can help you reposition some of your assets into vehicles that would generate nontaxable income.

That way, regardless of how low or high tax rates go in the future, you could rest assured that you wouldn’t face any nasty surprises. Generally speaking and for the most part, some very simple tweaks are all that would be required to achieve this. However, you will need a savvy, experienced advisor who knows exactly what he/she is doing.

For a much more detailed look into specific vehicles and strategies, get a copy of my acclaimed book, 5 Mistakes YourFinancial Advisor Is Making.

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Making 2013 resolutions about your investments or retirement planning? Call us today at 877.656.9111 or visit us on the Web to schedule your complimentary, confidential consultation with experienced financial professionals who can help you make the most of your investments and plan for a secure retirement that takes all the pieces into account.

The Fiscal Cliff Deal is Essentially a Tax Hike on the Middle Class

The Fiscal Cliff Deal is Essentially a Tax Hike on the Middle Class

Most Americans are under the impression, erroneous as it may be, that Congress’ nick-of-time fiscal cliff deal basically stuck it to the “rich” (in this case, single individuals earning more than $400,000 a year or couples making more than $450,000) by increasing their top marginal rate to 36.9 percent and their dividends/capital gains rate to 20 percent.

However, practically everyone who gets a paycheck in the next few paydays will see their taxes increase by 2 percent (or see their take home pay decrease on the first $113,700) also as a result of that deal.

Personally, I think this should have been made the headlines for the very simple reason that it affects practically every wage earner in America. How many folks at your workplace (or in your neighborhood) make more than $400,000 a year? On the other hand, I bet you know folks who make $113,700 or less a year, right? That’s everyone! The fact of the matter is that your taxes also went up although you probably don’t consider yourself rich - and indeed you’re not, according to Congress’ and the President’s own definition.

This past Friday, a friend of mine who considers herself decidedly not rich told me that her biweekly paycheck was $55 less. So all of a sudden, she’s going to have to make do with almost $120 less every month, going forward. If I’m not mistaken, President Obama and politicians from both parties promised again and again that the middle class wouldn’t see a dime of tax increases, didn’t they? In fact, almost every pundit in the media predicted – wrongly – that this 2 percent tax increase wasn’t going to happen.

As I explain extensively in my book, 5Mistakes Your Financial Advisor Is Making, anyone who thinks that Congress is likely to tax only the rich to fix our unsustainable debt problem is, quite frankly, being naïve. Hopefully, you didn’t drink that Kool-Aid, did you?

You see, there just aren’t enough rich people to tax. Besides, under our current tax code, it’s possible for someone who made way more money to end up paying less income tax than someone who made a lot less in the same year. The reason is that it’s all about your taxable income and less about gross/total income. Congress knows all too well that the rich hire the best financial minds – like those here at LaserFG – to help them legally keep their taxes to the barest minimum. So in a nutshell, the middle class is the easiest tax revenue target.

In my next column, I will discuss what you should be doing to keep your retirement assets out of Congress’ reach. But in the meantime if you already haven’t done so, get yourself a copy of my book from Amazon or the iTunes store so that you can be in the know!
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Making 2013 resolutions about your investments or retirement planning? Call us today at 877.656.9111 or visit us on the Web to schedule your complimentary, confidential consultation with experienced financial professionals who can help you make the most of your investments and plan for a secure retirement that takes all the pieces into account.