This week, readers continue to search for answers to their most pressing financial questions. Here are the ones that I felt could benefit a cross-section of our readers:
Last week I discussed several strategies for maximizing your social security benefits. This week I’ll examine some of the nuances of how your Social Security benefits are taxed and how you might be able to reduce those taxes.
- No taxes on Social Security. For joint filers with combined income below $32,000 ($25,000 for single filers) there is no federal taxation of Social Security benefits.
- Taxes on up to 50% of Social Security. Joint filers with combined income between $32,000 and $44,000 ($25,000 to $34,000 for single filers) may have to pay income taxes on up to 50% of their Social Security benefits.
- Taxes on up to 85% of Social Security. For joint filers with combined income above $44,000 ($34,000 for single filers) then you may pay taxes on up to 85% of your benefit. No one pays federal income tax on more than 85% of his or her Social Security benefits.
Eighty million Baby Boomers are headed for retirement and for many, Social Security will be the centerpiece of their retirement income plan. Today, I’ll reveal three little-known strategies that just might put thousands of dollars in your pocket.
I recently wrote about investment alternatives for retirees who are seeking higher income in today’s challenging investment environment. A younger reader wrote me with a question from his age group’s particular perspective:
In these turbulent financial times, people have lots of questions about their personal finances and investing their money. Here’s one reader’s question:
- Will. Your will basically states who gets all your ‘stuff’. If you have minor children, they can’t receive ‘stuff’ so you have to designate an adult (or trustee) to hold and manage your assets for their benefit. If your children are minors (typically under the age of 18), your will says who will raise them until they are adults. Without a will, your assets will transfer according to state law and the courts will decide who will raise your minor children.
- General and durable power of appointment. This is a relatively simple document where you appoint someone to handle your financial affairs should you become incompetent due to an accident or illness. Should you become incapacitated without having a power of attorney, someone must hire an attorney, go to court and have the court appoint an attorney-in-fact. This can be time consuming and expensive.
- Living Will. In most states, this is a downloadable document whereby you indicate your end-of-life wishes regarding artificial life support. It should also include a power of appointment for healthcare decisions whereby you appoint someone to represent you to the medical staff. Without a living will, medical staff will follow hospital guidelines that may be in direct conflict with your wishes. To download your state’s living will form, visit the Resource Center atwww.WelchGroup.com; click on ‘Links’; then click on ‘Living Wills- State by State’. Be sure to have this document properly witnessed.
- Primary beneficiary is the spouse with ‘children’ named as the contingent beneficiary. Should the spouse predecease the insured, the children become the primary beneficiaries. If any of the children are minors, you have a similar situation as described in our story.
- Primary beneficiary is the spouse with no contingent beneficiary where there are minor children. In this case, should the spouse predecease the insured, the effect is to make the insured’s estate the primary beneficiary. The insurance proceeds would then be distributed according to the insured’s will, if he or she has one.
- Primary beneficiary is an ex-spouse. Yep, this happens! A couple goes through a divorce and they forget to change the beneficiary on their personal life insurance or the group life through their employer.
- Beneficiary is a person who is ill equipped to handle a large sum of money. Let’s face facts. Many people simply lack the experience to handle a large sum of money and would be best served by having the money directed to a trust for their benefit.
Please feel free to use or re-post this article so long as you post it exactly as it was written and credit Stewart Welch III and provide the website address www.GetRichOnPurpose.com
Check out Stewart’s New eBook, “Marrying Finances” coming soon. Visit the store section at www.GetRichOnPurpose.com for more information!
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