Our daily roundup of retirement news your clients may be thinking about.
High-income seniors are advised to engage in tax planning to reduce their modified adjusted gross income and minimize their Medicare premium surcharge, which is expected to increase in 2018, according to this article on The Wall Street Journal. The premium surcharge is imposed on the top earners, who pay up to $4,090 in combined surcharges for Medicare Parts B and D above the base yearly premium of $1,462 per person. To lower their modified adjusted gross income, wealthy people should donate appreciated stocks instead of cash to a charity, consider a Roth IRA conversion, boost contributions to workplace retirement plans, and find ways to lower their capital gains. --Wall Street Journal
Required minimum distributions should be part of retirement tax planning as these distributions can increase retirees' taxable income, according to this article on MarketWatch. Aside from tax-deferred accounts, such as 401(k) plans and traditional IRAs, clients who want to minimize their RMDs should save in Roth accounts, which provide tax-free withdrawals in retirement. Holding too much retirement savings in tax-deferred accounts is not recommended, as this means delaying tax liability in the future, especially when retirees start collecting RMDs at age 70 1/2. Clients who have substantial funds in traditional IRAs are advised to withdraw at age 59 1/2, when no early penalties will be charged on withdrawals. --MarketWatch
Lawmakers have filed legislation to repeal the Windfall Elimination Provision and the Government Pension Offset rules, which reduce Social Security benefits of people who are eligible for public-sector pensions, according to this article on Money. A revised version of the bill seeks to reduce the WEP penalty by 14%, after lawmakers who penned the initial bill wanted to cut the penalty by half. “Full repeal is the holy grail,” said an official from the National Active and Retired Federal Employees Association, which supports the proposed 50% reduction in WEP penalty. --Money
Social Security has added a new security measure on its website by requiring people to enter a code sent to their cell phones before they can access their accounts, according to this article on CNNMoney. The new verification process was put in place to comply with an executive order requiring federal agencies to provide more secure authentication for their online services, according to the article. However, this new feature prevents many seniors from checking their accounts because they either don't have a cell phone or don't know how to use one. "Social Security recognizes that not every mySocialSecurity account holder may have a cell phone, have consistent cell service in a rural area, or be able to receive a text message," but it is "not currently able to offer alternative methods," the agency said in a statement. --CNNMoney
Seniors who start collecting Social Security retirement benefits at the age of 62 will enjoy the benefits for a long time, but the monthly payout will be reduced, according to this article on personal finance website Motley Fool. Instead, they may want to consider collecting their benefits when they reach their full retirement age, or delaying until they turn 70 for bigger monthly benefit value. The lifetime benefit will be the same regardless of the filing age, so clients are advised to account for their retirement plans and their needs throughout their golden years before deciding at what age to start receiving their retirement benefits. --Motley Fool
