www.iraownersmanual.com
Open in
urlscan Pro
141.193.213.11
Public Scan
URL:
https://www.iraownersmanual.com/
Submission: On December 17 via api from US — Scanned from US
Submission: On December 17 via api from US — Scanned from US
Form analysis 2 forms found in the DOM
POST https://sendfox.com/form/3zoxwm/mpng2q
<form id="mpng2q" class="sendfox-form" action="https://sendfox.com/form/3zoxwm/mpng2q" method="post" data-async="true" data-recaptcha="true"><input name="email" required="" type="email" placeholder="Email">
<p></p>
<p><!-- no botz please --></p>
<div style="position: absolute; left: -5000px;" aria-hidden="true"><input tabindex="-1" autocomplete="off" name="a_password" type="text" value=""></div>
<p><button type="submit">Submit</button></p>
</form>GET https://financialducksinarow.com
<form method="get" id="pp-searchform" action="https://financialducksinarow.com">
<div>
<input type="text" name="s" id="s-input" maxlength="150" accesskey="4" title="Search Getting Your Financial Ducks In A Row" onblur="this.value=(this.value=='') ? 'Type in and hit enter to search' : this.value;"
onfocus="this.value=(this.value=='Type in and hit enter to search') ? '' : this.value;" value="Type in and hit enter to search">
<input type="hidden" id="s-submit" value="'Search'">
</div>
</form>Text Content
GETTING YOUR FINANCIAL DUCKS IN A ROW
Independent financial advice: IRA, Social Security, income tax, and all things
financial
Skip to Content ↓
* Home
* The Books
* A Social Security Owner’s Manual
* An IRA Owner’s Manual
* Blankenship Financial Planning
* Services @ Blankenship Financial
* Resources
* All About Jim
REQUIRED MINIMUM DISTRIBUTIONS AND THE SUCCESSOR BENEFICIARY
Dec 11th, 2023 by jblankenship. 4 comments
Photo credit: diedoe
If the beneficiary of an inherited IRA dies before exhausting the inherited IRA
or qualified retirement plan (QRP) through distributions, how are the ongoing
distributions to be handled?
In this case, there is no Eligible Designated Beneficiary, regardless of your
status with regard to either the original IRA owner or the beneficiary.
As a successor beneficiary (the beneficiary of an original inherited IRA’s
beneficiary), upon the death of the original beneficiary you would continue to
use the same distribution plan as the original beneficiary, with a new 10-year
time period to fully distribute the account.
This means that by December 31 of the year that includes the 10th anniversary of
the death of the original beneficiary, the entire account must have been fully
distributed.
SHARE, TWEET, PRINT, EMAIL, LIKE OR PIN THIS POST:
*
*
*
* WhatsApp
* Reddit
* Share
* Save
* Print
*
LIKE THIS:
Like Loading...
Posted on Dec 11th, 2023 by author: jblankenship.
4 comments already - add to the conversation!
Posted in: inherited IRA, qualified retirement plan, survivors.
Tagged: inherited IRA · qualified retirement plan · survivors
THE AFFECT OF EARNINGS ON YOUR SOCIAL SECURITY BENEFIT
Nov 27th, 2023 by jblankenship. No comments yet
Photo credit: coop
Your wage earnings and other income can impact your Social Security benefit in
several ways. These earnings can increase the amount of your Social Security
benefit that is taxable. In some cases, continued earnings can increase your
future benefit rate as well. Wage earnings while collecting benefits can also
reduce your current benefit if you’re over the annual earnings limits and you’re
under Full Retirement Age. Continued wage earnings at or above the substantial
earnings limits can also result in a smaller WEP reduction, or perhaps eliminate
WEP altogether.
TAXATION
Depending on your level of income, Social Security benefits may be included at
as high as an 85% rate with your other taxable income on your tax return. But
this level can range to as little as 0% if your provisional income (all of your
other income besides Social Security benefits plus 1/2 of your Social Security
benefit) is low enough.
For more details on how this works, check out this article on taxation of Social
Security benefits.
INCREASING FUTURE BENEFITS
When you continue to work, depending on your wage income (or net self employment
income), you may be increasing your future benefits. This happens when you have
relatively low income reported in some earlier years (or perhaps zero income)
and those low or zero years are included in your top-35 years of indexed
earnings on record with Social Security.
To see how your benefit might increase, here’s an article about the calculation
of the Average Indexed Monthly Earnings (AIME), which is used then to produce
your Primary Insurance Amount (PIA) – a critical figure in determining your
Social Security benefit amount.
REDUCING CURRENT BENEFITS
What happens if you are earning a significant amount of money (more than the
limits) and you decide to go ahead and begin receiving your benefit before Full
Retirement Age (FRA)?
When you’re under FRA, wage earnings greater than the limits will result in a $1
for $2 over the limit reduction to your annual benefits. Eventually at FRA
you’ll get credit for those withheld benefits, but in the meantime your benefit
is reduced by the over-earnings.
If you’re already at or older than FRA, you have no limit on your earnings,
either as an employee or as a self-employed individual. Your earnings have no
negative impact on your Social Security retirement benefit, although if your
earnings are significant and more than some of your earlier earnings years, your
future benefits could possibly increase as mentioned above. In addition, any
benefits that your dependents or spouse may be receiving that are based upon
your record are also not impacted by your earnings at this stage.
SMALLER OR ELIMINATED WEP REDUCTION
If your earnings from SS-covered wages are at or above the substantial earnings
limits, you can gradually eliminate the impact of WEP reduction on your
benefits. Once you have 20 or more years of these substantial earnings, WEP’s
impact begins to shrink with each added year of substantial earnings. When you
reach 30 years of substantial earnings covered by Social Security, WEP is
effectively eliminated for you.
For more on how this works, see this article on substantial earnings with regard
to WEP.
SHARE, TWEET, PRINT, EMAIL, LIKE OR PIN THIS POST:
*
*
*
* WhatsApp
* Reddit
* Share
* Save
* Print
*
LIKE THIS:
Like Loading...
Posted on Nov 27th, 2023 by author: jblankenship.
No comments yet - start the conversation!
Posted in: earnings test, income tax, social security benefits, wep, windfall
elimination provision.
Tagged: earnings test · income tax · social security benefits
WHICH RETIREMENT ACCOUNT SHOULD YOU TAP FIRST?
Nov 13th, 2023 by jblankenship. No comments yet
Photo credit: jb
If you have multiple options of various different kinds of accounts to choose
from, such as an IRA, a Roth IRA, a qualified retirement plan (such as a 401(k)
plan) also known as a QRP, and perhaps an inherited IRA; you may be asking
yourself: which one should I withdraw from first?
If you’re under age 59½, some of the options include considerable penalties –
withdrawals from either the traditional IRA or the QRP will incur a 10% penalty
for early withdrawal unless you meet one of the exceptions. So this leaves the
Roth IRA or the inherited IRA. Each of these can be taxable to some degree, or
partly non-taxable, depending upon the circumstances.
If the inherited IRA was subject to estate tax upon the passing of the original
owner, you may be able to take a portion of your withdrawal in credit against
the estate tax, due to the IRD tax deduction. In today’s world, this is less and
less likely due to the increased estate tax exemption of $12+ million, but it’s
still something to consider in your quest.
If you’re age 59½ or older and still working, the 10% penalty will not apply to
any of your accounts, but that doesn’t mean that your choice is completely
unlimited with no consequences. There are still tax issues to consider, as well
as other affects that the law places on you as the owner of these accounts.
At any age, your contributions and conversions more than five years old can be
withdrawn from your Roth IRA without tax or penalty. Any growth in the account
will be subject to tax and penalty, and any conversions that were completed less
than five years ago will also be subject to the 10% penalty.
Since you’re required to take a distribution from the inherited IRA (if you’re
not the surviving spouse in some cases), this is where you’ll be taking a
withdrawal no matter what other circumstances are occurring. If your need for
money is greater than the Required Minimum Distribution (RMD) from the inherited
IRA, then the most tax efficient option is to take a withdrawal of your
contributions to the Roth IRA.
After those choices, you also could take a loan from your 401(k) plan (as long
as this is available). This would be another option that is tax efficient (in
general) but you would need to pay back the loan, and in turn this is a good way
to derail your retirement savings. This could also result in taxation of your
loan amount if you leave employment.
Lastly, you can always take money from your IRA and pay the taxes and penalties.
This is probably the least desirable of all the options, as it is the most
costly.
Something else to consider, if you have an inherited IRA and you’re not the
surviving spouse: you’re required to take the RMD from the account each year,
and this can often be a nuisance to keep track of. If you’re in need of money
you can take extra from the inherited account and this will reduce future RMDs
or perhaps eliminate them if you drain the account. Of course each dollar
withdrawn is likely subject to ordinary income tax.
The other thing that makes the inherited IRA the better choice (over your other
retirement accounts) is that you can defer use of these accounts until you reach
age 73 (for your entire lifetime for the Roth) – and the rate of withdrawal will
be less than with the inherited IRA.
In addition, for your owned accounts (non-inherited) your beneficiaries of those
accounts can stretch payments over 10 years, or their lifetimes if they are
specially eligible designated beneficiaries.
Once you reach age 73 (if born between 1951 and 1959), you must begin taking
distributions from your IRAs and QRPs. These are a required minimum amount each
year, so you can take the minimum and augment that amount by withdrawing from
your Roth IRA options if you have them available.
As in earlier ages, you still need to withdraw the RMDs from your inherited
IRAs, this continues throughout your life or as long as there is money in the
account.
The goal should be to keep current taxes to a minimum, so using the Roth account
may be a good option if you need more money than the RMDs provide for you.
However, your Roth IRA is the one account that never requires you to take
withdrawals during your lifetime. This can result in a legacy to provide for
your heirs – one that will have no tax consequences to your beneficiaries.
SHARE, TWEET, PRINT, EMAIL, LIKE OR PIN THIS POST:
*
*
*
* WhatsApp
* Reddit
* Share
* Save
* Print
*
LIKE THIS:
Like Loading...
Posted on Nov 13th, 2023 by author: jblankenship.
No comments yet - start the conversation!
Posted in: conversions, inherited IRA, IRA, qrp, retirement accounts, Roth IRA.
Tagged: inherited IRA · IRA · qrp · retirement accounts · roth ira
HOW TO GET YOUR PRIOR YEAR TAX RETURN INFORMATION FROM THE IRS
Nov 6th, 2023 by jblankenship. No comments yet
If you’re trying to find information from your prior years’ tax returns and you
don’t have the old forms (who has the space to keep all that!?), you have a few
options available to you.
Generally speaking, your tax preparer should have old records for you – as long
as it wasn’t too long ago. Sometimes this is a challenge for the preparer, as
changes to software and office systems can result in difficult to retrieve
records, although within reason your preparer should be able to get the forms
for you.
If your preparer either doesn’t have the information or you’re reluctant to
approach the preparer for the information, or you’ve moved, or the preparer is
no longer in business, you have another option available to you: the IRS.
According to this IRS Tax Tip, there are things you need to know if you need
federal tax return information from a previously-filed tax return.
Taxpayers who didn’t save a copy of their prior year’s tax return, but now need
it, have a few options to get the information. Individuals should generally keep
copies of their tax returns and any documents for at least three years after
they file.
If a taxpayer doesn’t have this information here’s how they can get it:
ASK THE SOFTWARE PROVIDER OR TAX PREPARER
Individuals should first check with their software provider or tax preparer for
a copy of their tax return.
GET A TAX TRANSCRIPT
If a taxpayer can’t get a copy of a prior year return, then they may order a tax
transcript from the IRS. These are free and available for the most current tax
year after the IRS has processed the return. To protect taxpayers’ identities,
this document partially hides personally identifiable information such as names,
addresses and Social Security numbers. All financial entries, including the
filer’s adjusted gross income, are fully visible. People can get them for the
past three years, and they need to allow time for delivery.
HERE ARE THE THREE WAYS TO GET TRANSCRIPTS:
* Online. People can use Get Transcript Online to view, print or download a
copy of all transcript types. They must verify their identity using
the Secure Access process. Taxpayers who are unable to register or prefer not
to use Get Transcript Online may use Get Transcript by Mail to order a tax
return or account transcript type. Taxpayers should allow five to 10 calendar
days for delivery.
* By phone. Taxpayers can call 800-908-9946 to request a transcript by phone.
Transcripts requested by phone will be mailed to the taxpayer.
* By mail. Taxpayers can complete and send either Form 4506-T or Form
4506-T-EZ to the IRS to get one by mail. They use Form 4506-T to request
other tax records: tax account transcript, record of account, wage and income
and verification of non-filing. These forms are available on the Forms,
Instructions and Publications page on IRS.gov.
REQUEST A COPY OF A TAX RETURN FROM THE IRS
Prior year tax returns are available from the IRS for a fee. Taxpayers can
request a copy of a tax return by completing and mailing Form 4506 to the IRS
address listed on the form. There’s a $43 fee for each copy and these are
available for the current tax year and up to seven years prior.
SHARE, TWEET, PRINT, EMAIL, LIKE OR PIN THIS POST:
*
*
*
* WhatsApp
* Reddit
* Share
* Save
* Print
*
LIKE THIS:
Like Loading...
Posted on Nov 6th, 2023 by author: jblankenship.
No comments yet - start the conversation!
Posted in: income tax, irs.
Tagged: income tax · irs
10% PENALTY APPLIED TO ROTH CONVERSION? MAYBE
Oct 16th, 2023 by jblankenship. No comments yet
Photo credit: jb
In general, when you withdraw funds from an IRA prior to age 59½, your
withdrawal is subject to both income tax and the 10% early withdrawal penalty.
The 10% penalty is waived if your withdrawal is for one of the exception
categories, including first-time home purchase, certain medical expenses, and
the like. For a complete list of the exceptions, see the article I had
previously written which provides links to the various exceptions to the 10%
penalty.
One of the exceptions to the penalty is a withdrawal for a Roth Conversion. You
still must pay ordinary income tax on the conversion, but generally the 10%
penalty will not apply to amounts converted from a traditional IRA to a Roth
IRA.
However (and there’s always a however in life), there are a couple of situations
where the 10% penalty could impact you as you enact your Roth Conversion.
FUNDS USED TO PAY THE TAX
If you used some of the funds from your Roth Conversion to pay the tax on the
conversion, then effectively those funds were not converted. Therefore, if
you’re under age 59½, the 10% penalty will apply to those funds that you used to
pay the tax on the conversion.
For example, if you withdrew $50,000 from your traditional IRA to convert to a
Roth IRA, but pulled out $5,000 to pay the tax on the conversion, then you
really only converted $45,000 into the Roth IRA – and the $5,000 was withdrawn
for other purposes than the conversion – so therefore subject to the 10%
penalty. The entire $50,000 withdrawn from the traditional IRA would also be
subject to ordinary income tax, as you might expect.
FUNDS WITHDRAWN WITHIN THE FIRST FIVE YEARS
When you convert funds from a traditional IRA to a Roth IRA and you’re under age
59½, the converted funds are restricted from withdrawal for the lesser of five
years or until you reach age 59½. If you withdraw the converted funds from the
Roth IRA prior to the date the restriction is lifted, your withdrawal will be
subject to the 10% penalty.
This restriction is in place to keep a taxpayer from converting funds to a Roth
IRA prior to age 59½ (avoiding the 10% penalty) and then immediately withdrawing
the funds from the Roth IRA account, thereby effectively taking a withdrawal
from the traditional IRA without penalty. By requiring a delay for such
withdrawals of up to five years, this strategy will lose its luster for someone
who is hoping to use it to his advantage.
It does provide a way for an individual to do some advance planning if he or she
chose to do so, though…
ADVANCE PLANNING STRATEGY
Imagine if you were age 50 and hoped to retire in five years. You have a
traditional IRA, amounting to $250,000, plus a pension and a 401(k) plan at your
employer. You know that you’ll need $50,000 per year to live on during the years
of age 55 to 60 – so you could convert $50,000 per year for the next five years,
paying the tax from other sources.
Then you would have $50,000 per year available to you, beginning at age 55, that
would be totally free from tax and penalty, since the conversion occurred more
than five years in the past. When you reach age 60 you’ll have unencumbered
access to your other sources of income (since you’re over age 59½), and in a few
years you’ll have Social Security available as well.
It’s not a strategy that will work for everyone, but in certain circumstances it
might work well for you.
NOTE: You’d want to plan this out very carefully so that you don’t trip up on
any of the conversion dates and your future withdrawal dates.
SHARE, TWEET, PRINT, EMAIL, LIKE OR PIN THIS POST:
*
*
*
* WhatsApp
* Reddit
* Share
* Save
* Print
*
LIKE THIS:
Like Loading...
Posted on Oct 16th, 2023 by author: jblankenship.
No comments yet - start the conversation!
Posted in: Early Distribution, IRA, retirement accounts, Roth Conversion, Roth
IRA.
Tagged: IRA · roth conversion · roth ira
MORE CLARIFICATION ON ROLLOVERS AND TRANSFERS
Oct 9th, 2023 by jblankenship. No comments yet
Photo credit: diedoe
I’m compelled to provide an additional update to the posts I’ve provided in the
past in the article Running Afoul of One Rollover Per Year Rule and its
follow-up More on the One-Rollover-Per-Year Rule. This is primarily to provide
clarity to a portion of this rule that I personally was unclear on when the
articles were originally written.
The rule is that you are restricted to one IRA rollover in a 12-month period. So
let’s define a few things for the purpose of this discussion:
Rollover – this is when you move money from one IRA to another, first taking
possession of the funds prior to depositing the funds into the new (or the same
old) IRA account. You have 60 days to complete this process. At the end of the
tax year you’ll receive a 1099R from the original custodian, with a distribution
code of 1 or 7 (this form is important to the rule).
Transfer – Also known as a trustee-to-trustee transfer or a direct rollover, in
this case you do not take possession of the funds, they are transferred directly
from one IRA to another. Another possible way this could occur if you receive a
check from the old custodian made out to the new custodian. Typically this sort
of movement of funds does not generate a 1099R at the end of the year, as you’ve
not actually made a distribution – no taxable event has occurred.
12 months – this really means a full year, 365 days in a normal year, 366 days
in a leap year.
THE RULE
Now that we have our definitions, here is the rule:
You are restricted to only one Rollover for ALL IRA accounts that you own,
either receiving or distributing during a full 12 months from the date of the
first distribution.
Transfers are not influenced by this rule. You are allowed to make as many
transfers between IRAs as you like, uninhibited by the rule.
An example is in order: You have an IRA at Mutual Fund Company A, and you take a
rollover distribution, after which you deposit the money into your IRA account
at Brokerage B. You are restricted in that you cannot make any other rollovers
into or out of any IRAs that you personally own, except for inherited IRAs,
which you are not allowed to make a rollover distribution from anyway (only
transfers are allowed). IRAs owned by your spouse are also not limited by
actions you’ve made with IRAs that you own.
Roth IRA Conversions and Recharacterizations do not apply to this rule either –
these are different sorts of distributions, and can be taxable events, but are
not subject to this rule’s restriction.
Lastly, the rule does not apply to rollovers into or out of Qualified Retirement
Plans (QRPs) such as a 401(k). You are free to do as many rollovers into or out
of an IRA to/from QRPs with no time restrictions. This can often give you an
extra advantage if you really need to move money again and a transfer is not in
order.
Hopefully this has helped to fully clarify the rule.
SHARE, TWEET, PRINT, EMAIL, LIKE OR PIN THIS POST:
*
*
*
* WhatsApp
* Reddit
* Share
* Save
* Print
*
LIKE THIS:
Like Loading...
Posted on Oct 9th, 2023 by author: jblankenship.
No comments yet - start the conversation!
Posted in: IRA, qrp, qualified retirement plan, retirement plan, Roth
conversion.
Tagged: IRA · qrp · qualified retirement plan · retirement plan
AVOID ERRORS IN YOUR TAX FILING
Sep 25th, 2023 by jblankenship. No comments yet
Photo credit: jb
As we approach the extended income tax filing deadline, folks all over the
country are in a mad rush to fill out returns and complete the filing process.
Software for return preparation has helped to resolve a lot of the issues and
errors that occur in filing your returns, but still errors occur – there’s no
way to completely fool-proof the process.
Below is a list that was published by the IRS, entitled Tax-Time Errors Filers
Should Avoid:
TAX-TIME ERRORS FILERS SHOULD AVOID
Mistakes on tax returns mean they take longer to process, which in turn may
cause your refund to arrive later. The IRS cautions against these nine common
errors so your refund is timely.
1. Incorrect or missing Social Security Numbers When entering SSNs for anyone
listed on your tax return, be sure to enter them exactly as they appear on
the Social Security cards.
2. Incorrect or Misspelling of Dependent’s Last Name When entering a
dependent’s last name on your tax return, ensure they are entered exactly as
they appear on their Social Security card.
3. Filing Status Errors Make sure you choose the correct filing status for your
situation. There are five filing statuses: Single, Married Filing Jointly,
Married Filing Separately, Head of Household, and Qualifying Widow(er) with
Dependent Child. See Publication 501, Exemptions, Standard Deduction, and
Filing Information to determine the filing status that best fits your needs.
4. Math Errors When preparing paper returns, review all math for accuracy. Or
file electronically; the software does the math for you!
5. Computation Errors Take your time. Many taxpayers make mistakes when
figuring their taxable income, withholding and estimated tax payments,
Earned Income Tax Credit, Standard Deduction for age 65 or over or blind,
the taxable amount of Social Security benefits, and the Child and Dependent
Care Credit.
6. Incorrect Bank Account Numbers for Direct Deposit or Debit If you are using
direct deposit for a refund or direct debit for a payment, make sure that
you review the routing and account numbers for your financial institution.
7. Forgetting to Sign and Date the Return An unsigned tax return is like an
unsigned check – it is invalid. And, remember on joint returns both
taxpayers must sign the return (another item that is not necessary when
filing electronically, although electronic signatures, authorization, are
required).
8. Incorrect Adjusted Gross Income Information Taxpayers filing electronically
must sign the return electronically using a Personal Identification Number.
To verify their identity, taxpayers will be prompted to enter their AGI from
the originally filed federal income tax return for the prior year, or the
PIN number used previously if they used a PIN for the prior year. Taxpayers
should not use an AGI amount from an amended return, Form 1040X, or a math
error correction made by the IRS.
9. Figuring Credits or Deductions Taxpayers can make mistakes figuring things
like their earned income tax credit, child and dependent care credit and
child tax credit. Tax software will calculate these credits and deductions
and include any required forms and schedules.
SHARE, TWEET, PRINT, EMAIL, LIKE OR PIN THIS POST:
*
*
*
* WhatsApp
* Reddit
* Share
* Save
* Print
*
LIKE THIS:
Like Loading...
Posted on Sep 25th, 2023 by author: jblankenship.
No comments yet - start the conversation!
Posted in: earned income credit, EITC, income tax, irs.
Tagged: income tax · irs
ADVICE ON SOCIAL SECURITY BENEFITS
Sep 18th, 2023 by jblankenship. 6 comments
I get a lot of questions about when to take Social Security benefits most
efficiently, and when to begin Spousal Benefits. And unfortunately, I am often
at a loss for giving a specific answer to the individual, because I just don’t
have enough information.
Social Security planning has very many factors that must be considered – for
example:
* It’s important to consider earnings from your job if you’re filing early and
continuing to work (see Social Security Earnings Tests for more information),
as this can impact the amount of benefits you actually receive.
* Your health status and longevity are critical to the equation as well – since
delaying strategies often rely on your longevity to achieve payback (more
information in the article Your Payback from Social Security).
* Of course, your marital status is important to the equation as well. If
you’re married, you should think about Spousal Benefits and Survivor Benefits
in addition to your own benefit. And if you’re divorced or widowed,
additional considerations must be brought into the equation as well.
* Probably the most important of all – do you need the money right now? Too
often this factor is overlooked in our zeal to “get our money back”. As
you’ll see in this article on delaying benefits, it can be very worth your
while to delay receiving benefits – but again, this shouldn’t be done
blindly.
Each individual’s circumstances has other factors to consider as well. Your
overall retirement plan has to be the context against which these factors should
be considered.
As you take these factors and others into account, it’s important to perform
break-even analysis on your benefits at various ages, along with that of your
spouse (if you have one). Then it’s up to you to decide what makes the most
sense in your situation. If you have a trusted advisor that you can work with to
help you with your analysis, all the better.
And lastly, if I can help you with this analysis, this is what I do for a
living. As always, I am happy to help you understand the nuances of the various
programs and all – the only thing I ask of you is that you pass the word along
to your friends and acquaintances. It’s my hope that when questions about Social
Security and other financial issues come up, I can help.
SHARE, TWEET, PRINT, EMAIL, LIKE OR PIN THIS POST:
*
*
*
* WhatsApp
* Reddit
* Share
* Save
* Print
*
LIKE THIS:
Like Loading...
Posted on Sep 18th, 2023 by author: jblankenship.
6 comments already - add to the conversation!
Posted in: fiduciary, file and suspend, retirement, security retirement
benefits, Social Security.
Tagged: fiduciary · file and suspend · retirement · Social Security · social
security benefits
REQUIRED MINIMUM DISTRIBUTIONS FOR IRAS AND 401(K)S
Sep 5th, 2023 by jblankenship. 8 comments
Photo credit: jb
This is one of those subjects that can be a bit confusing – and it’s based on
the rules that apply to the different kinds of plans, as well as different kinds
of beneficiaries. You are aware that you’re required* to begin taking Required
Minimum Distributions (RMDs) once you reach age 70½ – no wait, 72 – whoops now
it’s 73*** – but did you know that specifically which account you take the RMD
from has some flexibility? Well – not only flexibility, also some rigidity…
THERE IS A DIFFERENCE BETWEEN IRA AND 401(K)
Starting off, we need to understand that, in the IRS’s eyes, there is a big
difference between an IRA and a 401(k). For brevity, we’re referring to all
sorts of Qualified Retirement Plans, such as 403(b)** or 457 plans, as 401(k)
plans. You may consider the two things to be more or less equal, but if you
think about it, there are considerable differences between an IRA and a 401(k) –
amounts you can fund the account with each year, catch-up arrangements, who can
defer funds into each kind of plan, and the list goes on.
A 401(k) plan, being an employer-provided retirement plan, has a completely
different set of rules governing it – including provisions that go all the way
back to the original ERISA legislation. Among those rules are the rules about
RMDs.
On the other hand, the IRA is not covered by ERISA, and as such there are other
rules that apply to these arrangements – including the RMDs.
We don’t have nearly enough space here to go over everything that is different
between these two types of plans, but we’ll cover the RMD treatment.
REQUIRED MINIMUM DISTRIBUTIONS (RMD)
Each and every 401(k) plan* that you own is treated as a separate account in the
eyes of the IRS. As such, if you have four old 401(k) plans when you reach age
73, you will have to calculate and take a separate RMD from each 401(k) plan
that you have. In other words, you couldn’t aggregate all the plans together and
take one RMD from one of the accounts that is large enough to cover all the
RMDs. In addition, you have to consider each account separately and figure out
how much of each RMD is taxable, if you happen to have post-tax dollars in the
account(s).
However, no matter how many IRAs that you have, the IRS looks at all of these
plans as one single plan, so you are allowed to pool all of the account balances
together, calculate the RMD amount, and then withdraw that amount any single IRA
account or any combination of accounts. Your tax basis is aggregated as well (if
you have non-deducted contributions in the accounts), so the tax treatment is a
consideration for the entire pool of your IRAs in total (rather than account by
account as is the case with 401(k) plans).
EXAMPLE
You have two old 401(k) plans and three IRAs. This is your year, you’ve reached
age 73, so you have to start taking RMDs. How do you do it for these five
accounts?
Each 401(k) plan’s RMD has to be calculated separately – and a RMD taken
directly from each account. But you can pool the IRA account balances together,
calculate and take one RMD from one of the accounts that is large enough to
cover all three accounts’ minimum distribution. Or from multiple accounts if you
wish, as long as the total of your distributions is at least as much as the RMD
amount calculated for all of your IRAs.
This is another reason why it can be helpful (from a paperwork standpoint, if
nothing else) to rollover your old 401(k) plans into IRAs. By doing this, you
don’t have to take a distribution from, in the case of the example above, three
different accounts at a minimum.
* Note: if you are still working after age 73 and you’re not a 5% or more owner
of the company and your 401(k) plan allows it, you may not be required to take
RMDs from the account. This is yet another difference between IRAs and 401(k)s
with regard to distributions.
**Also – specifically for 403(b) accounts – you may aggregate all of your 403(b)
accounts together for RMD calculation and distribution.
***Lastly, the switcheroo about the age to begin RMDs is the result of the
SECURE Act(s) – as of 2023 the RMD age is 73, and will remain so until 2033.
SHARE, TWEET, PRINT, EMAIL, LIKE OR PIN THIS POST:
*
*
*
* WhatsApp
* Reddit
* Share
* Save
* Print
*
LIKE THIS:
Like Loading...
Posted on Sep 5th, 2023 by author: jblankenship.
8 comments already - add to the conversation!
Posted in: 401k, 403 b, employer plan, IRA, iras, minimum distributions, qrp,
qualified retirement plan, required minimum distribution, retirement plan, rmd,
tax.
Tagged: 401 k · 403 b · IRA · qrp · rmd
NUA AND THE ROTH CONVERSION
Aug 28th, 2023 by jblankenship. 1 comment
You may or may not be familiar with the concept of Net Unrealized Appreciation
(NUA) as it relates to company stock owned in your 401(k) plan. Click the link
to get a rundown on it if you’re not familiar with NUA.
Briefly, when you take distribution from your 401(k) you can rollover everything
but the company stock (your company) to an IRA, and then put the company stock
in a taxable account. By doing this, you pay tax only on the basis of the
company stock, and in the future you will only have to pay capital gains tax on
the sale of the company stock, rather than ordinary income tax as you would if
the company stock (or the proceeds) were in a traditional IRA.
Now, let’s toss in the Roth Conversion concept – you pay tax on the amount that
would be otherwise taxable if the distribution were in cash, but you place the
funds in a Roth IRA account, and you don’t have to pay tax on it in the future
at all (as long as you meet the qualifications).
How do these two concepts work together? Well, at one time, it was thought that
you could work both sides of the coin and utilize the loophole: if you converted
the company stock directly to the Roth, it seems that you would only have to pay
tax on the basis of the stock (per NUA rules), and then never have to pay tax on
the capital gains. This is because the stock is held in a Roth IRA.
Not so fast, though. The IRS figured this out pretty quickly after the rules for
conversion from a qualified plan to a Roth IRA were put into effect in 2009. For
this specific circumstance, you must treat the Roth conversion from a qualified
plan as if it were first rolled over to a traditional IRA, and then converted to
a Roth IRA. The one exception to the way this is handled is that you only have
to consider the qualified plan’s funds that you’re converting – rather than all
of your IRAs as you would normally (cream in the coffee rule) – for tax
purposes.
At any rate, since you must treat the Roth conversion as if it were originally
rolled into a traditional IRA, the NUA treatment option is foregone at that
point. So if you tried to do this, you’d end up with a failure, and no NUA
treatment would be available to you.
This results in your having to pay ordinary income tax on the entire value of
your company stock holdings if you do such a conversion (rather than just the
basis). So it may still be to your benefit to enact the NUA rule and put the
company stock into a taxable account rather than an IRA – but you’ll have to run
the numbers to figure out if this will work best for you.
Photo by kthread
SHARE, TWEET, PRINT, EMAIL, LIKE OR PIN THIS POST:
*
*
*
* WhatsApp
* Reddit
* Share
* Save
* Print
*
LIKE THIS:
Like Loading...
Posted on Aug 28th, 2023 by author: jblankenship.
1 comment already - add to the conversation!
Posted in: forbes.com, IRA, net unrealized appreciation, NUA, retirement plan,
Roth Conversion, Roth IRA, roth ira conversion.
Tagged: IRA · NUA
PROPERTY FLIPPING GAINS DEEMED ORDINARY INCOME, NOT CAPITAL GAINS
Aug 21st, 2023 by jblankenship. No comments yet
Since the housing market downturn, the national pastime of “property flipping”
has fallen in popularity – heck, I haven’t seen a TV show on property flipping
in ages. But the activity of buying a fixer-upper, applying a little sweat
equity, and then reselling for a profit has been going on ever since Gog first
rehabbed and sold that condo-cave with a view.
If you (or someone you know) are involved in flipping, there have been tax cases
that you may want to pay particular attention to. Most of the time, the question
of how the sales receipts are classified was addressed, and how the Tax Court
responded should be of interest to anyone involved in flipping.
Here’s how one case played out: the taxpayer asserted (among other things), that
the activity of buying, rehabbing, and then reselling the properties was an
investment activity, and so any gains should be treated as capital gains. The
IRS disagreed that this was investment activity, but rather a purchase and
re-sell of inventory, and that the income from the activity should be treated as
ordinary income.
The Tax Court agreed with the IRS. The nature of the taxpayer’s buying and
reselling activity, given that they bought and sold between four and eight
properties per year, holding them for two to three months in most cases.
According to the Tax Court Memo, the following factors are used to determine
whether an asset is a capital investment or if it is an item purchased with the
sole intent to resell:
1. The taxpayer’s purpose in acquiring the property
2. The purpose for which the property was subsequently held
3. The taxpayer’s everyday business and the relationship of the income from the
property to the total income
4. The frequency, continuity, and substantiality of sales of property
5. The extent of developing and improving the property to increase the sales
revenue
6. The extent to which the taxpayer used advertising, promotion or other
activities to increase sales
7. The use of a business office for the sale of property
8. The character and degree of supervision or control the taxpayer exercised
over any representative selling the property
9. The time and effort the taxpayer habitually devoted to the sales
For the full text of TC Memo 2010-261, click the link. There are bound to be
many other cases but this one caught my eye when this article was first written,
nearly 13 years ago. As far as I can determine, this treatment still applies
today.
Apparently the factor in the above list that caused the greatest damage to the
taxpayer’s assertion of investment activity is #4, frequency of sales. In
addition, the absence of any intent to lease the properties to generate returns
underscores the case that the property was purchased solely to re-sell.
Since the taxpayer in this case purchased and sold fifteen properties within
three years and did not attempt to lease or hold the properties for a
significant period of time, the Tax Court deemed that the taxpayer’s business
activity would be most appropriately classified as “dealers of real estate”.
With that classification, the profits derived from sales (above the purchase
price and rehab expenses) would be deemed to be ordinary income, subject to
self-employment tax and ordinary income tax.
Other factors weighed on this decision, not the least of which was the fact that
the profits from sales of properties constituted the primary source of income
for the taxpayer during the period.
Understandably, given the much lower tax rate on capital gains versus ordinary
income tax rates (not to mention the self-employment tax incurred), it would
have been far better for the taxpayer if the profits had been considered capital
gains.
As I understand it, in order to be truly successful at property flipping, volume
is important. Turning over properties quickly at a profit while putting as
little money at risk for as short a period of time possible is the name of the
game. This can hardly be described as capital gains oriented activity – at least
that’s what the Tax Court says.
Photo by mike t ormsby
SHARE, TWEET, PRINT, EMAIL, LIKE OR PIN THIS POST:
*
*
*
* WhatsApp
* Reddit
* Share
* Save
* Print
*
LIKE THIS:
Like Loading...
Posted on Aug 21st, 2023 by author: jblankenship.
No comments yet - start the conversation!
Posted in: capital gains, irs, tax, tax case.
Tagged: tax
TIMELESS THOUGHTS ON INVESTING
Aug 14th, 2023 by jblankenship. 1 comment
I was recently re-reading an older book, The Money Game, by “Adam Smith”, and I
came across a very poignant passage that I thought I should share. This book was
written in 1967, and it is a very interesting take on money and how we view it.
The passage relates to how we perceive investments in general, as well as the
importance of having a goal for your investments and saving activities. Keep in
mind that this passage was written more than 55 years ago, so some references
will be woefully out of date, but the message is still clear and valid. Let me
know if it gives you inspiration – I thought it was particularly good:
> A stock is, for all practical purposes, a piece of paper that sits in a bank
> vault. Most likely you will never see it. It may or may not have an Intrinsic
> Value; what it is worth on any given day depends on the confluence of buyers
> and sellers that day. The most important thing to realize is simplistic: The
> stock doesn’t know you own it. All those marvelous things, or those terrible
> things, that you feel about a stock, or a list of stocks, or an amount of
> money represented by a list of stocks, all of those things are unreciprocated
> by the stock or the group of stocks. You can be in love if you want to, but
> that piece of paper doesn’t love you, and unreciprocated love can turn into
> masochism, narcissism, or, even worse, market losses and unreciprocated hate.
>
> It may sound a little silly to have a reminder saying The Stock Doesn’t Know
> You Own It were it not for all the identity fuel provided by the market these
> days. You could almost sell these identities as buttons: I Am the Owner of
> IBM, My Stocks Are Up 80 Percent; Flying Tiger Has Been So Good to Me I love
> It; You All Laughed When I Bought Solitron and Look at Me Now.
>
> Then there is a great big master button called I Am a Millionaire, or I Am So
> Shrewd My Portfolio Has Gone into Seven Figures. The magic of this
> million-dollar number, and of its accessibility to Everyman, is so great that
> books sell with titles like How I Made A Million or You Can Make Millions,
> with very little content at all. They are the most dangerous of all the things
> written on the market because (and I collect them as a hobby) inevitably there
> is some mechanical formula somewhere within. Never mind who you are or what
> your capacities and abilities are, just charge in with the book open to
> chapter three.
>
> If you know that the stock doesn’t know you own it, you are ahead of the game.
> You are ahead because you can change your mind and your actions without regard
> to what you did or thought yesterday; you can, as Mister Johnson said, start
> out with no preconceived notions. Every day is a new day, providing, in the
> Game, a new set of continuously measurable options. You can live up to all
> those old market saws, you can cut your losses and let your profits run, and
> it doesn’t even make your scar tissue itch because, being selfless, you are
> unscarred.
>
> It has been my fate to know people who have made considerable amounts of
> money, sometimes millions, in the market. One is Harry, who made it and blew
> it and made it again. Harry really wanted to make a million dollars, and he
> did. I think Mr. Linheart Stearns had a very good point when he said the end
> object of investment ought to be serenity. Now if you think making a million
> dollars will give you serenity, there are two things you can do. One is to
> find a good head doctor and see if you can discover why you think a million
> dollars will give you this serenity. This will involve lying on a couch,
> remembering dreams, talking about your mother, and paying forty dollars an
> hour. If your course is successful, you will realize that you do not want a
> million dollars but something else which the million dollars represents to
> you, such as love, potency, mother, or what have you. Released, you can go off
> about your business and not worry any more, and you will be poorer only by the
> number of hours you spent in accomplishing this times forty dollars.
>
> The other thing you can do is to go ahead and make the million dollars and be
> serene. Then you will have both a million dollars and serenity, and you do not
> have to deduct the number of hours times forty dollars unless you feel guilty
> about making it.
>
> It seems simple, and there is indeed a catch. What do you do if the million
> dollars arrives and serenity does not? Aha, you say, you will worry about that
> when you get to it, you are shure you can handle it. Perhaps you can. Money,
> contrary to popular myth, does help people more than it spoils them, simply
> because it opens up more options. The danger is that when you have your
> million, you then want two, because you have a button saying I Am A
> Millionaire and that is who you are, and there are, all of a sudden – as you
> will notice – so many people with buttons saying I Am a Double Millionaire.
>
> <portion eliminated>
>
> The trouble with Harry is not just the trouble with one man who made and lost
> a lot of money, nor even that there are hatching, at this very instant, other
> Harrys who will play out this role next month and next year. The trouble goes
> beyond Harry, beyond Wall Street; it’s a kind of virus in the whole country,
> when the cards of identity say not how well the shoe is cobbled or the song is
> sung, but are a set of numbers from an adding machine. Usually we hear only
> the triumphs by adding machine, but those who live by numbers can also perish
> by them, and it is a terrible thing to have an adding machine write an
> epitaph, either way. Perhaps measuring men by the marketplace is one of the
> penalties of our age, but if some scholar would tell us why this must be, we
> would all know more about ourselves.
Boilt down, the gist of this passage is two lessons:
1) Don’t get emotionally involved in your stock, fund, or whatever investment
you make. All decisions should be made without regard to your past ownership or
any other factors besides the fundamental and technical analysis you do on your
investment choices.
2) Have a goal in mind for your investment activity. What “Smith” recommends is
simply serenity – and if you can define “serenity” for yourself, you’ve set the
goal. And if serenity isn’t what you’re looking for, choose and define “chaos”
or whatever is important to you.
Photo by Wikimedia
Excerpt from The Money Game, by ‘Adam Smith’, pages 81-84
SHARE, TWEET, PRINT, EMAIL, LIKE OR PIN THIS POST:
*
*
*
* WhatsApp
* Reddit
* Share
* Save
* Print
*
LIKE THIS:
Like Loading...
Posted on Aug 14th, 2023 by author: jblankenship.
1 comment already - add to the conversation!
Posted in: Book review, financial planning, investing.
Tagged: financial planning
PRINCIPLES OF POLLEX: INVESTMENT ALLOCATION
Aug 9th, 2023 by jblankenship. 1 comment
Photo credit: jb
(In case you are confused by the headline: a principle is a rule, and pollex is
an obscure term for thumb. We’re talking about Rules of Thumb.)
In this installment of the Principles of Pollex, we address a compelling
Investment Allocation Rule of Thumb: Invest X% of your money in bonds, and the
remainder in stocks – where “X” is equal to your age. According to this rule, if
you’re 35 years old, you’ll have 35% invested in bonds and 65% invested in
stocks.
WHAT’S GOOD ABOUT IT
Absent any other allocation strategy, at least this strategy provides you with a
structure for scaling back your exposure to stocks over time. It’s important to
understand that your risk exposure should in general reduce as you reach closer
and closer to your goal. This is because you have less time between now and the
use of the funds to make up for any downturns.
But you need to keep in mind that once you reach retirement age, you’re not
“done”. You have many more years ahead of you (hopefully!) for that investment
to support your lifetime spending needs.
In addition to the structure, using such an allocation strategy will require you
to be more conservative earlier on in your investing life, and less conservative
later in your life, than is likely for most folks. Left to our own devices, we’d
be a little more likely to be overly aggressive in the early years (100% stocks,
for example) when we ought to have an exposure to bonds to help balance out the
portfolio to help us make it through market downturns without losing faith.
In addition, as we start into retirement years, too often we think that we
should become totally conservative (100% bonds) when in actuality we have a long
time (30+ years left in our projected life) to make the portfolio continue to
work for us. With that long-term horizon we need to continue with an exposure to
stocks in order to keep up with inflation and have continued growth in the
portfolio.
WHAT’S NOT SO GOOD
As with all Rules of Thumb, the problem with this one is that it’s too general
to be appropriate for everyone – really for anyone. For most people with
long-term investing horizons, such as 25 years or more, this allocation scheme
is very conservative, and may result in needlessly squelching possible returns
early in your investing career.
On the other hand, if you had chosen this sort of allocation scheme, you’d be
(likely) much better insulated against significant stock market downturns like
the one in 2022 than if you’d gone with a 100% stock exposure.
Additionally, while this rule of thumb does account for your timeline to a
degree, assuming that at retirement (let’s say age 65) your risk tolerance and
requirement for returns is in the range where a 65% bond/35% stock portfolio
will meet your needs. The problem is that this is likely too conservative to
meet most folks’ needs over the potential 30 or more years that you need the
portfolio to continue meeting inflation and growing.
Lastly, this allocation plan only takes into account the two very broad
allocation options of stocks and bonds. A well-diversified portfolio may also
include sub-categories of global bonds and stocks, commodities, real estate, and
other components that are not so easily “thumbed”.
A BETTER WAY, MAYBE?
If you need a rule of thumb, maybe you could take this same one and put in an
additional factor to make it not quite so conservative – like adding 25% to the
stock factor, and possibly limiting both factors to no less than 10%. So, for a
person age 35, you would have a stock component of 90% (100% minus your age, 35,
plus 25% equals 90%) and a bond component of 10%. Each subsequent year you’d
increase the bond portion by 1% and decrease the stock portion by 1%. At any age
less than 35, you’d still be at a 90/10 stock-to-bond ratio. Upon retirement you
might reduce the additional 25% factor somewhat – maybe to add only 10%, for
example – so that at age 65 your ratio would be 45% stock, 55% bond.
Another way could be to work with a professional financial advisor to lay out a
proper allocation plan that is tuned to your own timeline, risk tolerance, and
preferences. But if you’re fixed on doing it yourself, this adapted principle of
pollex may be useful to you. You will probably want to put a little more effort
into your plan than this – and likely you will over time.
SHARE, TWEET, PRINT, EMAIL, LIKE OR PIN THIS POST:
*
*
*
* WhatsApp
* Reddit
* Share
* Save
* Print
*
LIKE THIS:
Like Loading...
Posted on Aug 9th, 2023 by author: jblankenship.
1 comment already - add to the conversation!
Posted in: financial planning, investing, principles of pollex, rules of thumb.
Tagged: financial planning
LET IT ALL GO – IRS GIVES YOU 11 YEARS… (NOW 12½ YEARS!)
Aug 7th, 2023 by jblankenship. No comments yet
Photo credit: diedoe
When you were a kid, did you ever dream of being able to just let it all go –
not having to follow any rules, no penalties, no restrictions? What if I told
you that the IRS provides you with just such an environment – where you are free
to literally do (or not do) almost anything you want with your IRA? Including
buying yourself that pet camel you always wanted?
So just where is this nirvana? Where you can just go willy-nilly and do whatever
suits you with your IRA? It’s not a where, but rather, when.
Between the ages of 59½ and 72 there are no rules or restrictions regarding
withdrawals from your IRA – including no required withdrawals. How ’bout them
apples?? That’s a full 150 months where you can take money out of your IRA at
any time, for any reason, and there are no consequences! Well, the one
consequence is that you have to pay ordinary income tax on the tax-deferred
withdrawals. You’re also free to not take money out of your account, if you wish
– a privilege that you might yearn for after you reach the end of this
free-for-all time.
One other thing that comes up during this span of 12½ years: at age 70½, you
have the ability to begin making Qualified Charitable Distributions (QCDs) from
your IRA. These can be very useful if you are making charitable contributions
anyhow, and you otherwise take the Standard Deduction. It used to be (back in
the olden days before the SECURE Act) that you had to be subject to RMDs in
order to take advantage of QCDs, but no longer. You just need to be 70½ years of
age and you’re all set to take QCDs.
And it gets better if you have a 401(k) – you have from age 55 to age 72 with no
restrictions, the only additional requirement being that you have separated from
service (left your employer) on or after age 55. And many employers are stepping
up and helping folks out with that lately – hardly a day goes by without hearing
of someone “separating from service”.
On the other hand, if you’re still employed by that employer, the required
minimum distributions don’t apply to you at age 72. Often the employer restricts
your distributions while employed (but not always).
So – when everything seems to be going against you, you can sit back and think
about how the IRS has given you this wonderful span of time… eleven full years…
with no restrictions.
SHARE, TWEET, PRINT, EMAIL, LIKE OR PIN THIS POST:
*
*
*
* WhatsApp
* Reddit
* Share
* 1Save
* Print
*
LIKE THIS:
Like Loading...
Posted on Aug 7th, 2023 by author: jblankenship.
No comments yet - start the conversation!
Posted in: IRA, retirement plan.
Tagged: IRA · retirement plan
ORGANIZATION, EFFICIENCY & DISCIPLINE
Jun 12th, 2023 by jblankenship. 3 comments
Photo credit: jb
Simplification is usually beneficial to any pursuit. If you can break down the
basic principles of whatever “big thing” it is that you’re hoping to accomplish
into simple concepts, you’ll do well in your pursuit.
This is true for whatever you’re hoping to accomplish – climbing Mount Everest
(train, prepare, keep going up); write a book (gather information, organize,
keep writing); or get a college degree (show up, pay attention, study). In
preparing for retirement (or saving for any goal), I’ve always broken the
concepts down to organization, efficiency, and discipline.
ORGANIZATION
In order to get things started, it’s important to know where you are in your
financial life. When you’re getting driving directions from Google Maps, the
first thing they ask you is where you’re starting from. The same goes for
“mapping” your financial path. Gather together your information and organize it
so that you know what assets and what liabilities you have. This can be as
simple as listing everything out on a piece of paper, or a computer spreadsheet,
or using some of the tools available on the internet, such as Mint.com.
Also gather your information about your monthly and annual expense requirements
– preferably with an eye toward understanding what is a “must” expense and what
is a “nice” expense. If you’re having trouble balancing your budget (your income
is less than your expenses) you’ll need to look at the “nice” expenses and
determine what you can do without.
The last piece of Organizing is to set forth a goal – or several goals,
depending on your situation. Maybe it’s a goal to retire in five years… or to
send your kids to college in 8 years. Whatever is the goal, you need to quantify
it (put it in terms of dollars and time), and so that you can map out the way to
get there from where you are now.
Having everything organized will tell where you are financially, and knowing
what your expenses are compared to your income will help you to understand what
you can do to make changes in your financial life in order to reach those goals.
EFFICIENCY
Now that you know where you are and where you’re going, it’s time to figure out
how to get there. As you know, there are many types of investment accounts,
investment products, and the like, that you could use to increase your bottom
line. My preference is to use the most Efficient methods, in terms of placement
of funds, taxes, expenses, and risks, in order to take you toward those goals.
When saving for a goal, especially a goal with a long-term time horizon such as
retirement, it makes good sense to be tax-efficient as possible with your
choices of investing accounts. IRAs and 401ks provide near-term tax benefits but
might prove to be more tax-costly in the long run; Roth-type accounts provide
longer-term tax benefits due to the tax-free qualified withdrawals from those
accounts.
Efficiency of investment occurs when you utilize vehicles such as mutual funds
to provide diversification across multiple investments within one transaction.
It is far more efficient to purchase no-load, zero-expense (or near zero) mutual
funds and ETFs than it is to track and purchase a large number of individual
stocks (and bonds).
Efficiency in expenses can be addressed by utilizing no-load index mutual funds
and/or Exchange-Traded Fund (ETF) indexes. These two types of investment
products generally provide the most cost-efficient methods of investing. In
addition to the cost-efficiency, ETFs are also very tax-efficient, due to the
structure of the funds.
Not only are indexes very cost-efficient and tax-efficient, but indexes are also
risk-efficient as well. If you invest in indexes you are getting (generally) the
market’s movement in returns – something that less than 40% of managed funds can
do regularly.
DISCIPLINE
Now that you’ve figured out the methods to use in getting to your goals, you
have generated a plan to accomplish those goals. This is where discipline comes
into the picture. In order to achieve these goals, you have to create your plan
and stick to it, through thick and thin.
When the market is having difficulties and your accounts are experiencing a
downturn, you need to maintain the intestinal fortitude to continue with your
investing activities. This is where a good financial advisor or just an
accountability partner can help you out a great deal.
It’s maintaining the long-term view in the face of short-term “noise” like a
market downturn that helps you to meet those goals. Chickening out and selling
at the wrong time can derail things.
Discipline also extends to creating your budget and sticking to it as well. By
reviewing your expenses and determining where you can reduce, you’ll be able to
free up more money each month to eliminated debt and increase your savings
balances. But this only works if you really stick to the budget. Fudging it will
gradually erode the result you’ve planned.
BOTTOM LINE
By putting these basic tenets of Organization, Efficiency & Discipline to work
for you, you will soon begin to see progress toward your goals. Keeping things
as simple as possible helps to ensure that you’ll stay with your plan. As with
everything else, let me know if you have questions!
SHARE, TWEET, PRINT, EMAIL, LIKE OR PIN THIS POST:
*
*
*
* WhatsApp
* Reddit
* Share
* Save
* Print
*
LIKE THIS:
Like Loading...
Posted on Jun 12th, 2023 by author: jblankenship.
3 comments already - add to the conversation!
Posted in: financial planning, investing, rules of thumb.
Tagged: financial planning
HOW TO APPLY FOR SOCIAL SECURITY BENEFITS
Jun 5th, 2023 by jblankenship. No comments yet
Photo credit: jb
There are three methods you can use to apply for Social Security retirement
benefits. And since you’re reading this article you’re likely overwhelmed by the
prospect and don’t know where to start, so here’s how to apply:
By Phone – call the Social Security Administration at 1-800-772-1213 between the
hours of 8am and 7pm (they don’t say, but I’m assuming this is Eastern time) to
apply. You can also call 1-800-325-0778 for TTY service, if you require it.
Advice from the Social Security site indicates that there are often long wait
times, and that early in the day is typically better (8am to 10am) with somewhat
shorter waits. Later in the week and later in the month are generally shorter
wait times as well. In other words, calling at 3pm on Monday the 1st of the
month is likely going to result in very long wait times on the phone.
In Person – just show up at your local Social Security Administration office, or
call to set up an appointment at your local office (this is probably the better
option, for less wait time). You can find the closest office by clicking this
link and entering your ZIP code. From what I hear, visiting the local office
can be a hit or miss experience, similar to visiting the DMV to get your
driver’s license renewed. You could get right in with little wait, but more
likely you’ll spend quite a bit of time “in queue”. Here’s a tip though: if you
can work it out, I understand that the day after Thanksgiving is the best day of
all to visit the local SSA office. They’re open and operating, but nobody
expects them to be. It’s worth a try.
Also, you’re not required to go to only the nearest office. If there’s another
office nearby that is perhaps not as busy as your closest office, try getting an
appointment there.
Much like the phone queue, Mondays and the first week of the month, or the day
after a federal holiday are the busiest times for these offices. Also, like
every other people-intensive business, Social Security has staffing shortages
that tends to cause longer wait times in the office.
Online – you can go to the Social Security website and there, right in the
middle of the page, is a link to “Apply for benefits”. You can use this online
application if you’re at least 61 years and 9 months of age, and you plan to
begin your benefits within the next four months (you also live in the US or one
of its commonwealths or territories). If you’ve already set up your
mySocialSecurity account, you should be able to just log in to the system and
get started. Otherwise, you’ll need to set up your account, which might take a
while to complete the process.
If you’re already age 62 or better, you could begin receiving benefits as early
as the month you apply. In addition, if you’re at least 64 years, 8 months of
age, your online Social Security benefit application will automatically include
applying for Medicare.
Things you’ll need before you start the process, no matter which method you use:
* Your date and place of birth and Social Security number;
* Your bank or other financial institution’s Routing Transit Number and the
account number, if you want the benefits electronically deposited. You can
get this information from a check or deposit slip;
* The amount of money earned last year and this year. If you are filing for
benefits in the months of September through December, you will also need to
estimate next year’s earnings;
* The name and address of your employer(s) for this year and last year;
* The beginning and ending dates of any active U.S. military service you had
before 1968;
* The name, Social Security number and date of birth or age of your current
spouse and any former spouse. You should also know the dates and places of
marriage and dates of divorce or death (if appropriate); and
* A copy of your Social Security Statement, or access to the online version.
Even if the earnings on your Statement are not correct or you are not sure if
they are correct, please fill out the application. The Social Security
Administration will assist you in reviewing and correcting your record after
they receive the application.
SHARE, TWEET, PRINT, EMAIL, LIKE OR PIN THIS POST:
*
*
*
* WhatsApp
* Reddit
* Share
* Save
* Print
*
LIKE THIS:
Like Loading...
Posted on Jun 5th, 2023 by author: jblankenship.
No comments yet - start the conversation!
Posted in: Medicare, Social Security.
Tagged: Social Security
078-05-1120 – IS THIS YOUR NUMBER?
May 29th, 2023 by jblankenship. 1 comment
Hopefully it’s not what you think is your Social Security number, although it’s
quite possible that at some point you (or someone you know) did think it was
your (or their) correct number. Why is that? It’s a very interesting story (with
thanks to the Social Security Administration for the story):
The story of the most misused number of all time. . .
Mrs. Whitcher compares the Social Security card “issued by Woolworth” with her
own real card of the same number.
The most misused SSN of all time was (078-05-1120). In 1938, wallet manufacturer
the E. H. Ferree company in Lockport, New York decided to promote its product by
showing how a Social Security card would fit into its wallets. A sample card,
used for display purposes, was inserted in each wallet. Company Vice President
and Treasurer Douglas Patterson thought it would be a clever idea to use the
actual SSN of his secretary, Mrs. Hilda Schrader Whitcher (it was a much simpler
time, tbh).
The wallet was sold by Woolworth stores and other department stores all over the
country. Even though the card was only half the size of a real Social Security
card, was printed all in red, and had the word “specimen” written across the
face, many purchasers of the wallet adopted the SSN as their own. In the peak
year of 1943, 5,755 people were using Hilda’s number. SSA acted to eliminate the
problem by voiding the number and publicizing that it was incorrect to use it.
(Mrs. Whitcher was issued a new number.) However, the number continued to be
used for many years. In all, over 40,000 people reported this as their SSN. As
late as 1977, 12 people were found to still be using the SSN “issued by
Woolworth.”
The card that started all the fuss!
Mrs. Whitcher recalled coming back from lunch one day to find her fellow workers
teasing her about her new-found fame. They were singing the refrain from a
popular song of the day: “Here comes the million-dollar baby from the five and
ten cent store.”
Although the snafu gave her a measure of fame, it was mostly a nuisance. The FBI
even showed up at her door to ask her about the widespread use of her number. In
later years she observed: “They started using the number. They thought it was
their own. I can’t understand how people can be so stupid. I can’t understand
that.”
NOT THE ONLY ONE
The New York wallet manufacturer was not the only one to cause confusion about
Social Security numbers. More than a dozen similar cases have occurred over the
years–usually when someone publishes a facsimile of an SSN using a made-up
number. (The Whitcher case is far and away the worst involving a real SSN and an
actual person.)
One embarrassing episode was the fault of the Social Security Board itself. In
1940 the Board published a pamphlet explaining the new program and showing a
facsimile of a card on the cover. The card in the illustration used a made-up
number of 219-09-9999. Sure enough, in 1962 a woman presented herself to the
Provo, Utah Social Security office complaining that her new employer was
refusing to accept her old Social Security number–219-09-9999. When it was
explained that this could not possibly be her number, she whipped out her copy
of the 1940 pamphlet to prove that yes indeed it was her number!
LIFELOCK
Then there’s the story of Lifelock, the identity-fraud protection company. The
CEO of the company proudly proclaimed that his company’s protection was so good
that he could publish his own Social Security number, 457-55-5462, and have no
fear of identity theft.
You guessed it, this number has been used countless times by potential fraud
perpetrators, apparently 13 of which have been successful in their endeavors,
according to some reports.
SHARE, TWEET, PRINT, EMAIL, LIKE OR PIN THIS POST:
*
*
*
* WhatsApp
* Reddit
* Share
* Save
* Print
*
LIKE THIS:
Like Loading...
Posted on May 29th, 2023 by author: jblankenship.
1 comment already - add to the conversation!
Posted in: reader questions, Social Security.
Tagged: Social Security
19? NO, 22 WAYS TO WITHDRAW IRA FUNDS WITHOUT PENALTY
May 22nd, 2023 by jblankenship. 4 comments
Photo credit: dido
We’ve covered a lot of ground on how you can access your IRA funds in this blog.
Over time I have developed the following list of the ways to withdraw IRA funds
without penalty. The penalty for early withdrawal of IRA funds is 10% of the
withdrawal, unless one of the exceptions is met. This list is for Traditional
IRAs only. For a similar list regarding early withdrawal from a 401k plan,
follow this link. This list has been updated with the Secure 2.0 exceptions that
came into law in 2022, so that there are now 22 ways to withdraw funds from an
IRA without penalty.
It is key to note that, although these exceptions allow the distribution of
funds without triggering the 10% penalty, in most cases the account owner is
still liable for the ordinary income tax on distributions. Consult your tax
advisor for additional information.
19 22 WAYS TO WITHDRAW IRA FUNDS WITHOUT PENALTY
We’ll start with the obvious:
1. Normal distribution – take your withdrawal after age 59½
2. Before Tax Due – Withdraw annual contributions before the due date of your
tax return – an example would be to withdraw your 2023 contributions (and any
associated growth) before April 15, 2024.
3. Excess Contributions – Withdraw excess contributions before the due date of
your tax return – if you discovered that you had contributed more than allowed
(due to income limits or error) you are allowed to remove the excess and any
associated growth before the tax return is due for the year.
4. Required Minimum Distributions – technically this one is covered by #1 above
for most circumstances, but it also covers the case where RMD is required of a
person who has inherited an IRA, regardless of age.
Now we’ll move into some of the not-so-obvious methods, starting with SOSEPP.
SERIES OF SUBSTANTIALLY EQUAL PERIODIC PAYMENTS
This is the classic Section 72(t) method for withdrawing funds without penalty.
Essentially you agree to continue taking the same amount from your IRA for the
greater of five years or until you reach age 59½. There are three methods of
SOSEPP:
5. Required Minimum Distribution method – uses the IRS RMD table (usually Table
III) to determine your Equal Payments.
6. Fixed Amortization method – in this method, you calculate your Equal Payment
based on one of three life expectancy tables published by the IRS.
7. Fixed Annuitization method – this method uses an annuitization factor
published by the IRS to determine your Equal Payments.
Additional Section 72(t) methods for taking distribution from your IRA include:
8. Qualified Higher Education Expenses – you can withdraw your IRA funds to
help pay for college, within limits.
9. Death – If you die, your beneficiaries are able to take distributions from
your IRA without penalty, including RMDs (see #4 above).
10. Disability – If you are “totally and permanently disabled” by IRS
definition, you can take distributions from your IRA without penalty.
11. High Unreimbursed Medical Expenses – for yourself, your spouse, or your
qualified dependent. If you face these expenses, you are allowed to withdraw a
limited amount (the actual expenses minus 7.5% of your AGI) without penalty.
12. Medical Insurance Premiums – if you’ve lost your job and receive
unemployment compensation, you are eligible to withdraw an amount to pay for
your medical insurance premiums (with some additional limits).
13. First-Time Home Purchase – up to $10,000 ($20,000 for a couple) of the
costs of buying, building, or re-building a “first home”. First home is
determined by whether you had no present interest in a main home for two years
prior to the purchase.
And lastly, here are a few additional ways that you can withdraw your IRA funds
without penalty:
14. Qualified Reservist – If you were called to duty after September 11, 2001
and served for at least 6 months, you are allowed to make a withdrawal from your
IRA during your active duty period without penalty.
15. Divorce – although not a particular IRS regulation, multiple Private Letter
Rulings have allowed divorced parties to “split” an IRA into two separate IRAs,
both with the original restrictions on distribution. For an IRA this is known as
a transfer incident to divorce, while in a 401k plan it’s known as a QDRO.
16. Roth IRA Conversion – when you convert your funds from a Traditional IRA to
a Roth IRA, although you pay tax on the distribution, there is no 10% penalty
applied.
17. Rollover – using the 60-day period, you are eligible to have access to your
funds without penalty as long as the rollover is completed and the distributed
funds are deposited into an IRA (the same or a new account) within 60 days.
18. Payment to Advisor/Investment Manager – you are allowed to authorize your
custodian to pay your Advisor or Investment Manager from your IRA funds any fees
for managing your IRA. This includes transaction fees and annual custodian fees.
19. Periodic Temporary “Disaster Relief” provisions – from time to time, as the
situation merits, Congress will enact special legislation allowing individuals
impacted (primarily) by natural disasters to access IRA funds without paying the
10% penalty. Notable examples of such a recent provision was for victims of
Hurricanes Harvey and Irma. With the passage of Secure 2.0 in 2022, this
exception has been made permanent. Under this exception, an individual can take
a penalty-free withdrawal of up to $22,000 total from an IRA or other retirement
plan if the individual’s primary residence is located within a
federally-declared disaster area, an economic loss was sustained, and the
withdrawal is taken within 180 days of the first day of the disaster or later if
the disaster was declared later. The withdrawal can be repaid at any time during
the ensuing three years, and if not repaid the income can be spread (recognized)
equally over three years.
20. Terminal Illness – beginning in 2023, if an individual is certified by a
physician as having a terminal illness, which an illness that is reasonably
expected to result in death in 84 months or less, an exception to the 10%
penalty is granted. There is no maximum, and like the disaster relief exception,
can be paid pack within three years. The difference is that the income, if not
paid back, must be completely recognized in the year of the distribution.
21. Domestic Abuse – beginning in 2024, victims of domestic abuse by a spouse or
domestic partner that occurred within the previous 12 months are allowed an
exception to the 10% penalty. This exception is allowed on the lesser of $10,000
or 50% of the vested balance of the account. These distributions can likewise be
repaid over the following three years, but if not repaid must be recognized as
taxable income in the year of the distribution.
22. Financial Emergency – Effective in 2024, in the event of an “unforeseeable
or immediate financial need relating to personal or family emergencies”, up to
$1,000 can be withdrawn without penalty. This exception, if taken, negates the
option for the following three years unless the original distribution is repaid,
or future contributions exceed the amount of the previous emergency
distribution.
23. Birth or adoption – After the birth of a child, or after an adoption is
finalized, each parent is allowed to withdraw up to $5,000 from his or her IRA
or retirement plan without penalty. The withdrawal must be after the birth or
adoption, and is allowed penalty-free up to 12 months afterwards.
Now, did your list have 25 different ways? Perhaps I’ve overlooked some… let me
know if you have other ways in your list that folks can withdraw IRA funds
without penalty. Let me know what you think!
SHARE, TWEET, PRINT, EMAIL, LIKE OR PIN THIS POST:
*
*
*
* WhatsApp
* Reddit
* Share
* 3Save
* Print
*
LIKE THIS:
Like Loading...
Posted on May 22nd, 2023 by author: jblankenship.
4 comments already - add to the conversation!
Posted in: 72t, Early Distribution, Early Withdrawal, IRA, ira account, qrp,
retirement accounts, Roth Conversion.
Tagged: IRA
MAXIMIZE YOUR SOCIAL SECURITY BENEFITS BY CHANGING YOUR THINKING
May 15th, 2023 by jblankenship. No comments yet
Photo credit: jb
When it comes to Social Security retirement benefits, many folks look at the
payments as something they’ve earned… and that’s not totally off base if you
happen to receive benefits, because the amount of the benefit that you receive
is a direct result of your earnings over your career. But really, Social
Security is something else altogether.
Technically, Social Security retirement benefits are referred to as “Old Age,
Survivors and Disability Insurance”, or OASDI for short. I emphasized Insurance
there, because that’s what it is. It’s not an investment, because there’s not an
account with your name on a pile of money, just waiting for you to retire.
Rather, this is an insurance program, specifically insurance against living
longer than the average.
Like any other insurance plan, you pay in premiums (in the form of payroll
taxation), and if you live to the appropriate age, you may receive a benefit
from the plan. If you live longer than average, you might receive more in
benefits than you ever paid in; on the other hand, if you don’t live long enough
you might not receive any benefits from the plan, or very little benefits. In
this case, your premiums go to paying for other insureds who do live longer. In
addition, your spouse or child beneficiary(ies) may be eligible for benefits
based on your record.
That’s how insurance works. Let’s draw a comparison to auto insurance. With auto
insurance you pay monthly premiums to the insurance company, and if you have
damage to your vehicle, or some other type of claim like damage to someone
else’s property or medical expenses associated with an auto accident, then the
insurance company pays for your damage, to a limited degree (after deductibles,
and within plan limits).
Much the same as the description of Social Security, if you don’t experience an
event and therefore don’t submit a claim, you won’t get any payments from the
insurance company. Likewise, if all you ever had was a cracked windshield, you’d
get much less payback than someone who totaled their car. Your premiums then are
used to pay for folks who have experienced events and submitted claims for
reimbursement.
No one goes into the agreement to purchase auto insurance with the express
intent to get their money back out of the policy (well, at least no
non-sociopaths).
SO WHAT ARE THE SIMILARITIES?
* You pay in premiums to both an auto policy and Social Security
* You pay these premiums to protect you against an event. In the case of auto
insurance, it’s to help pay for damage to the car (among other things).
Social Security protects you against living longer than you otherwise have
money to cover.
* In both cases, the premiums of folks who don’t have claims (or fewer claims)
are used to cover the claims of folks who experience the event being insured
against.
With Social Security, assuming that you’ll live to the “average” (as determined
by actuaries) age of around 82, you’ll receive a similar amount of retirement
benefits no matter what age you start receiving those benefits. (There may be
slight differences depending on the relative ages of a married couple but we
won’t focus on that for now.) We might consider the amount received by about 82
to be the “base” amount of benefits.
But unless you have a reason to believe your lifespan will be something less
than average, I’d guess that most folks are at least hoping to live some amount
of time beyond the average. It’s that time beyond the average that makes the
decision about the age to begin receiving Social Security retirement benefits so
important. (Keep in mind that the lifespan of your spouse might be the important
factor here as well, if your spouse is eligible for survivor benefits and
outlives you.)
The relationship between the amount of Social Security retirement benefits and
the age you file for those benefits is that, the longer you delay (between the
earliest filing age of 62 and the latest age of 70) the larger the monthly
benefit you will receive. And subsequently, if you live past the average age
mentioned above, each month of delay results in a larger lifetime benefit,
maximized if you delay to the latest filing age of 70.
Usually, delaying filing for Social Security benefits to age 70 requires a trade
off somewhere – maybe you’ll have to take more money out of your IRAs or other
retirement savings earlier than you’d expected, or you might need to work longer
than planned. Either of these options can bridge the gap between the earliest
filing age and the latest filing age in order to help you maximize your Social
Security benefit.
Since Social Security retirement benefits are tax efficient,
cost-of-living-adjusted, guaranteed (don’t sacrifice me on the guaranteed part,
we’re not talking about policy here), and infinite (once you start receiving the
benefit you’ll receive it for life), it makes a great deal of sense to maximize
that monthly benefit amount. Especially so if you plan to live past “average”.
Think about it – above we mentioned a “base” amount of money you’ll receive from
Social Security benefits by the average age of death, around 82 years of age. So
if you’re average, you’ll get the base amount of money, and that’s all. If,
unfortunately, you don’t live as long as the average, you won’t get as much in
benefits – that’s the way it works, some folks don’t win the lottery of life.
But if you live longer than the average age, every single month’s benefit is a
bonus above the base. So again I ask, if you are expecting to live longer than
the average, why wouldn’t you try to maximize the amounts that will be,
essentially, your bonus?
For a minimized example, let’s say other than your Social Security benefits you
have IRA funds and other sources that just make up the difference between your
living expense needs and the amount you’ll receive in Social Security benefits.
When you get to age 83, you’ve expended all of your other sources completely,
and now all you have is Social Security to live on – doesn’t it make sense that
you should have maximized this benefit, so that as your life expectancy goes
onward you’ll have the largest possible monthly benefit?
I should point out that in a case like the above minimized example, you should
probably take some other action earlier, like working longer, or finding ways to
reduce your living expenses. Otherwise when you outlive your savings you may be
faced with some difficult decisions and be forced to take on a spartan lifestyle
by comparison.
ARGUMENTS AGAINST DELAYING:
* I don’t have enough money saved otherwise to get me through to the later
filing age.
* Not much to counterpoint this with. If you don’t have the resources to
delay, you may have no choice but to either file for Social Security
earlier, or continue working (or pick up a part-time job) in order to cover
your living expenses. Another viable alternative is to reduce expenses
somehow – downsizing your home, lifestyle, etc., or selling some of your
“things”.
* I don’t want to use my savings so early in my life! I’ve saved all these
years, using it to delay filing only draws down how much money I’ll have for
later on. (Also – I want to leave something from my retirement account for my
heirs!)
* (building off the prior answer) If you have at least enough funds to get
you through to the later filing age, you should use those less attractive
funds (fully taxable, not guaranteed, not cost-of-living-adjusted, and
finite – there’s only so much in the pot) to allow yourself to maximize
your Social Security benefits. Face it, if you’re that close to the edge
with your savings, you need Social Security benefits to be as large as
possible.
* Besides, you saved that money for a reason – to help pay for your
retirement. That’s exactly what you’ll be doing as you use these funds to
live on while delaying Social Security filing.
* Regarding leaving something to your heirs, if it comes down to paying for
food versus leaving that inheritance behind, you know what the choice is
going to be. If you live longer than your money can last, the heirs will be
the last thing on your mind.
* I can do so much better with my own investing than Social Security can. I’ll
take the benefits early and invest them to maximize my possible income stream
for later in life.
* First of all, delaying results in an increase to your monthly benefit
amount by anywhere from 6%-8% for each year of delay, guaranteed. (That
guarantee should have no arguments). If you can guarantee a return of 6%-8%
every year, you’re a genius and you have no business reading such mundane
articles as this. Go solve world hunger, why don’t you?
* Secondly, unless you’re extremely well disciplined, this concept of “I’ll
invest it all” is sham and you’re likely fooling yourself. Very few people
could put this into action, and then you’ve still got the guaranteed 6%-8%
factor mentioned above to overcome.
* Actually, in the long run, that 6%-8% increase works out to much more, due
to the fact that as long as you live you’ll continue receiving your Social
Security benefit. Think about how that can play out if you live to 90, 95,
100, or 110!
* What if I don’t live to age 82 (or age 70)? Then all of that money is just
wasted. My uncle (or cousin, brother, neighbor, etc.) worked his whole life
paying into Social Security and died at age 61½ (or 69, etc.) and got
nothing.
* Just the same as with auto insurance, in some cases you pay into it for a
long time and never make a claim. In other cases you have (heaven forbid) a
terrible auto accident and have huge medical, property, and auto
replacement claims, which are paid by your auto insurance. With Social
Security retirement benefits, there’s always the possibility that you might
not get any benefit, or very little in the way of benefits over your
lifetime if your life is shortened by an untimely death. It’s the gamble
that you take, to ensure that you’re covered in the event of living longer
than expected.
* I’m filing as early as possible to get my money back.
* Keeping with our comparison to auto insurance, often there are small
possible claims that you could submit, like a door ding from a parking lot.
Auto insurance has disincentives to discourage these small claims –
submitting and being paid for these small claims will result in an increase
to your premiums. Social Security’s disincentives apply when filing earlier
in your life – you’ll receive a smaller monthly benefit amount when filing
sometime before the maximum age.
* Social Security is going broke. I’m filing now (or as soon as possible) while
it’s still available.
* Suffice it to say – if you feel this way, then by all means, go ahead and
file whenever you want to. I disagree with your viewpoint, but I will not
argue it, experience tells me that this point of view is not likely to be
changed so I won’t try.
We didn’t cover the nuances involved with spousal benefits, dependent benefits,
or survivor benefits. These auxiliary benefits could impact your filing decision
in either direction, and coordination of all available benefits is necessary to
achieve an optimal outcome.
SHARE, TWEET, PRINT, EMAIL, LIKE OR PIN THIS POST:
*
*
*
* WhatsApp
* Reddit
* Share
* Save
* Print
*
LIKE THIS:
Like Loading...
Posted on May 15th, 2023 by author: jblankenship.
No comments yet - start the conversation!
Posted in: financial planning, Social Security.
ABC’S OF MEDIGAP POLICIES
May 8th, 2023 by jblankenship. 6 comments
Photo credit: jb
Medigap policies come in many flavors. If you’ve done any reading in this area
at all, you’ve probably come to realize that the whole thing is a messy alphabet
soup… and it’s really, really hard to figure it all out. If you want more
details on the choice between Medigap and Medicare Advantage plans, see the
article Medicare Supplements versus Medicare Advantage Plans.
What I’ve done here is to pull together a resource that may be helpful as you
consider your options for a Medigap plan.
THE ABC’S
Unless otherwise noted, the coverages are 100% of the item listed.
Plan A covers:
* Medicare Part A coinsurance hospital costs up to an additional 365 days after
Medicare benefits are used up
* Medicare Part B coinsurance or copayments
* Blood (well, the first 3 pints anyhow)
* Part A Hospice Care coinsurance or copayment
Plan B covers:
* Everything covered by Plan A, plus:
* Medicare Part A deductible
Plan C covers:
* Everything covered by Plan B, plus:
* Skilled nursing facility care coinsurance
* Medicare Part B deductible
* Foreign travel emergency (80%, up to plan limits)
Plan D covers:
* Everything covered by Plan B, plus:
* Skilled nursing facility care coinsurance
* Foreign travel emergency (80%, up to plan limits)
(in other words, everything in Plan C except the Medicare Part B deductible)
Plan E is no longer available as of May 31, 2010
Plan F covers:
* Everything covered by Plan C, plus:
* Medicare Part B excess charges
* Plan F also offers a high-deductible plan as well, in some states
Plan G covers:
* Everything covered by Plan D plus:
* Medicare Part B excess charges
* Plan G also offers a high-deductible plan as well, in some states
(in other words, everything in Plan F except the Medicare Part B deductible)
Plans H, I, and J are no longer available as of May 31, 2010
Now we’re getting to some of the more flexible plan options. These have been
developed to provide similar benefits as other plans but with additional
participation by the insured in order to reduce the premium costs.
Plan K covers:
* Everything covered by Plan D with the following exceptions:
* Foreign travel emergency is not covered
* There is a 50% coverage on the following:
* Medicare Part B coinsurance or copayments
* Blood (again, just the first 3 pints)
* Part A Hospice Care coinsurance or copayment
* Skilled nursing care facility coinsurance
* Medicare Part A deductible
* There is a yearly out-of-pocket maximum for all coinsurance and copayments of
$6,940 (for 2023). After this has been met (along with your annual Medicare
Part B deductible), the plan pays 100% of each covered service.
Plan L covers:
* The same coverage as Plan K except a 75% coverage on the items at 50%
coverage in Plan K
* The yearly out-of-pocket maximum for Plan L is $3,470 (for 2023), with the
same detail as Plan K otherwise
Plan M covers:
* Everything covered by Plan D with the following exception:
* Medicare Part A deductible is only covered at a 50% rate
Plan N covers:
* Everything covered by Plan D with the following exception:
* The Medicare Part B coinsurance or copayment is covered 100% except for
copayment for some office visits and some emergency room visits
SHARE, TWEET, PRINT, EMAIL, LIKE OR PIN THIS POST:
*
*
*
* WhatsApp
* Reddit
* Share
* 1Save
* Print
*
LIKE THIS:
Like Loading...
Posted on May 8th, 2023 by author: jblankenship.
6 comments already - add to the conversation!
Posted in: Insurance, Medicare.
← Earlier Posts
* Subscribe to our Feed via RSS
* SUBSCRIBE TO UPDATES BY EMAIL
Submit
* SEARCH
* CATEGORIES
(CLICK THE LINK BELOW TO LIST ARTICLES ON EACH TOPIC)
* 401k
* IRA
* Roth IRA
* Social Security
* income tax
* financial planning
* RECENTLY POPULAR ARTICLES
* Using Capital Gains and Losses to Help With a Roth Conversion
* IRA Trick - Eliminate Estimated Tax Payments
* IRA RMD Reporting
* 16 Ways to Withdraw Money From Your 401k Without Penalty
* History of the Individual Retirement Arrangement (IRA history)
* When Does WEP NOT Impact My Social Security?
* When is Your Social Security Birthday?
* Mutual Funds vs. 529 Plans
* Downside to the Age 55 Rule for 401k
* Windfall Elimination Provision (WEP) for Social Security
* PREVIOUS ARTICLE ARCHIVES…
Previous Article Archives… Select Month December 2023 November 2023 October
2023 September 2023 August 2023 June 2023 May 2023 April 2023 March 2023
February 2023 January 2023 December 2022 November 2022 October 2022 September
2022 August 2022 July 2022 June 2022 May 2022 April 2022 March 2022 February
2022 January 2022 December 2021 November 2021 October 2021 September 2021
August 2021 July 2021 June 2021 May 2021 April 2021 March 2021 February 2021
January 2021 December 2020 November 2020 October 2020 September 2020 August
2020 July 2020 June 2020 May 2020 April 2020 March 2020 February 2020 January
2020 December 2019 November 2019 October 2019 September 2019 August 2019 July
2019 June 2019 May 2019 April 2019 March 2019 February 2019 January 2019
December 2018 November 2018 October 2018 September 2018 August 2018 July 2018
June 2018 May 2018 April 2018 March 2018 February 2018 January 2018 December
2017 November 2017 October 2017 September 2017 August 2017 July 2017 June
2017 May 2017 April 2017 March 2017 February 2017 January 2017 December 2016
November 2016 October 2016 September 2016 August 2016 July 2016 June 2016 May
2016 April 2016 March 2016 February 2016 January 2016 December 2015 November
2015 October 2015 September 2015 August 2015 July 2015 June 2015 May 2015
April 2015 March 2015 February 2015 January 2015 December 2014 November 2014
October 2014 September 2014 August 2014 July 2014 June 2014 May 2014 April
2014 March 2014 February 2014 January 2014 December 2013 November 2013
October 2013 September 2013 August 2013 July 2013 June 2013 May 2013 April
2013 March 2013 February 2013 January 2013 December 2012 November 2012
October 2012 September 2012 August 2012 July 2012 June 2012 May 2012 April
2012 March 2012 February 2012 January 2012 December 2011 November 2011
October 2011 September 2011 August 2011 July 2011 June 2011 May 2011 April
2011 March 2011 February 2011 January 2011 December 2010 November 2010
October 2010 September 2010 August 2010 July 2010 June 2010 May 2010 April
2010 March 2010 February 2010 January 2010 December 2009
*
* CONTACT INFO
Blankenship Financial Planning, Ltd.
* Jim Blankenship, CFP®, EA
Phone 630-40-DUCKS (630-403-8257)
jim@blankenshipfinancial.com
Twitter: BlankenshipFP / Financialducks
Facebook: Jim Blankenship
LinkedIn: BlankenshipFP
Amazon: Author Page
Jim provides expert guidance for
your Retirement, Education Funding,
and Income Tax issues and concerns.
In addition to this blog, you’ll find Jim’s writings all around the internet,
as he is a regular contributor to Forbes.com, TheStreet.com, and FiGuide.
Several other sites also republish his work.
He has also written five books on Social Security, IRAs, 401(k) plans, and
Medicare. See below for more on the books.
*
Sterling Raskie, MSFS, CFP®, ChFC®
Phone 630-40-DUCKS (630-403-8257)
sterling@blankenshipfinancial.com
Twitter: SterlingRaskie
LinkedIn: SterlingRaskie
Sterling provides expert guidance for your Retirement, Insurance, Education
Funding, Investments and Income Tax issues and concerns.
In addition to this blog, you’ll find Sterling’s writings all around the
internet. Sterling is also an adjunct professor teaching courses in math,
finance, investments and insurance.
* Services @ Blankenship Financial
If you’d like to have us work with you on your financial questions, follow
this link for more information on how to get started.
* THE BOOKS!
The latest in our Owner’s Manual series, A 401(k) Owner’s Manual, was
published in January 2020 and is available on Amazon at this link. This book
includes all of the updates to retirement plans with passage of the SECURE
Act.
A Medicare Owner’s Manual, is updated with 2020 facts and figures. This
manual is available on Amazon at this link.
Social Security for the Suddenly Single can be found on Amazon at this link.
This book is narrowly-focused on divorcee Social Security strategies and
rules. It is also available in a Kindle version.
Sterling’s first book, Lose Weight Save Money, can be purchased by clicking
this link. The book is also available on Kindle, which you can find at this
Kindle version link.
An IRA Owner’s Manual, 2nd Edition is available for purchase on Amazon. Click
the link to choose the paperback version, or the Kindle version.
Jim’s book – A Social Security Owner’s Manual, is now available on Amazon.
Click this link for the Amazon ordering page.
* QUEUING WATERFOWL
In case you hadn’t already noticed, this blog doesn’t have much to do with
ducks – or any waterfowl for that matter.
No, what we’re doing here is talking about all things financial; getting your
financial house in order. Here in the Midwest, “getting your ducks in a row”
implies organization, which is one of the outcomes of having a better
understanding of your financial life.
I hope you find the answers you’re looking for among the articles here, and
perhaps a smile. If you can’t locate your answer, drop me an email or give me
a call – we’ll see what we can find for you.
And if you’ve come here to learn about queuing waterfowl, I apologize for the
confusion. You may want to discuss your question with Lester, my loyal
watchduck and self-proclaimed “advisor’s advisor”.
*
secured by
© 2023 Getting Your Financial Ducks In A Row | Powered by WordPress
A WordPress theme by Ravi Varma
%d