Social Security and Medicare Part B

In 2016, it is unlikely that Social Security “cost of living” benefits will increase. Conversely, there is a high probability that Medicare Part B premiums will increase steeply in for the same year. The combination of these two events has many people worried about an overall decrease in their net Social Security benefits.

For beneficiaries, Medicare Part B premiums are taken out of their monthly Social Security payment. The standard Medicare charge is 104.90 per month. In addition, there are varying Medicare premium tax brackets (based on the beneficiary’s Adjusted Gross Income), which deduct anywhere from $42 to $230.80 on top of the standard charge. An increase in these fees without a corresponding increase in Social Security COLA would result in a net reduction of Social Security benefits for many people.

The good news is that there is a “hold-harmless” provision in the United States Social Security Act. This provision states … Read More

Common 529 Plan Mistakes

As taxpayers work to fund college for their children, 529 plans can provide great benefits. These types of accounts are very easy to contribute too. However, parents who are not prepared may find it hard to spend the money that they have invested without being penalized.  In this article, we detail four common mistakes that people make with 529 plans.

First, some taxpayers attempt to use funds from a 529 plan to pay for expenses that are already claimed via tax credits such as the Lifetime Learning Credit or American Opportunity Credit. This is not allowed. In the same way, they cannot use these credits and deductions on expenses paid for from 529 plans.

Second, students should avoid using any distributions from grandparents’ accounts to pay tuition expenses. These distributions are viewed as giving non-taxed income to the student. This income could end up changing financial aid calculations, causing the student … Read More

Is a Roth Account Right for You?

Over the last decade, the total number of households with Roth IRAs has increased by 47%. This rapid growth clearly shows the value of these plans. But why exactly are people so thrilled about Roth accounts?

The most prominent difference between Roth IRAs and traditional plans is that Roth contributions are made post tax. With traditional retirement accounts, savers contribute pretax dollars and pay normal tax rates upon withdrawal of the funds. With Roth plans however, individuals pay normal tax rates before contributing.

Because of the relatively flexible rules surrounding Roth accounts, they have a variety of uses. Though it is most common to use the funds for retirement, some people utilize the accounts to fund college or as emergency funds. This is possible because of IRS rules stating that any contributions that you have made to your account can be withdrawn with no tax liabilities at any time. [After age … Read More