On January 1, the maximum amount of annual earnings subject to the Social Security tax – a.k.a. the payroll tax cap – increased to $113,700. Every year, this cap is adjusted to keep up with inflation. Many Americans are not aware that income above the cap is not taxed by Social Security. In other words, workers who make $113,700 or less per year pay a higher Social Security payroll tax rate than those who make more. To help alleviate Social Security’s long-term budget shortfall, raising — or even eliminating — the cap has gotten some attention from policy makers. A…
Here are some changes that appear relatively certain regardless of the action Congress takes: • The personal exemption will increase, reportedly to $3,900, in 2013 from $3,800 this year. • The maximum earnings subject to the Social Security tax will increase to $113,700 in 2013 from $110,100 in 2012. • Contributions to defined contribution plans will climb to a maximum $23,000 — $17,500 in regular contributions, up from $17,000 in 2012, plus $5,500 in catch-up contributions for those 50-plus, same as in 2012. • There will be a higher threshold on medical deductions, meaning it will be harder to qualify….
Growing numbers of families are compensating relatives who serve as caregivers. According to a report by the National Alliance for Caregiving and AARP, 43.5 million Americans looked after a friend or relative age 50 or older in 2009, 28% more than in 2004. In a survey conducted for Home Instead Senior Care, a home-care franchiser, nearly 7% of respondents said they receive compensation for providing care to a relative. Feeding this trend is the high unemployment rate, the costs of nursing-home care, and the 2006 changes in Medicaid law that affects asset protection strategies. Some 37% of caregivers surveyed by…
An article discussing the complexities of late-in-life divorces (noting that divorce is increasingly common in these age groups) by centering on three mistakes that must be avoided. The article is tax and social security sensitive, discussing 401(k)’s and advising trusts and other estate planning techniques. The three mistakes they relate, by their titles, are “ignoring taxes on retirement funds”, “overvaluing alimony, undervaluing Social Security”, and “forgetting about the kids” states SmartMoney.
Americans hold nearly $4.2 trillion in traditional IRAs. That money has yet to be taxed, so it’s small wonder that the government requires you to take your money out and start paying taxes on it. Required Minimum Distributions generally apply once you turn 70-1/2 years old. The required distribution amount is determined by a formula based on your account balance and your age. Bloomberg reported last week, however, that the Obama administration proposes to do away with minimum distributions on IRAs worth $50,000 or less. If this measure passes, it could impact a lot of people. The median amount of…
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