4 Social Security myths and the reasons why they’re overblown: Retirement Scan
Our daily roundup of retirement news your clients may be thinking about.
4 Social Security myths and the reasons why they're overblown
One of the misconceptions about Social Security is that payroll taxes should be raised and benefits should be cut considerably to save the program, according to this article on USA Today. While a tax increase may be necessary, this could be done gradually over decades. Another option is to raise the limits on earnings eligible for payroll taxes as well as the benefits.
Are you retired or semi-retired? Check your tax withholding now
Retirees receiving pension payments should ensure that their tax withholding is enough to cover their taxes this year, according to this article on The Wall Street Journal. That's because their pension payments will likely increase this year because of the lower tax rates under the new law. The increase means a bigger tax bill and their withholding would not be sufficient to cover the tax bill, which could result in a penalty.
Forget saving more, try working longer
A working paper from the National Bureau of Economic Research shows that raising savings rate by 1% over three decades has the same effect as delaying retirement for three to six months, according to this article on CNBC. While working longer could also mean more time for retirement investments to grow and bigger Social Security benefit payouts, a financial planner advises clients not to depend too much on this strategy to boost their nest egg. "Working longer feels more like a contingency than a strategy. The reality is most people want to retire as soon as they can."
High earners need to watch out for Medicare surcharge
Retirees are expected to pay additional Medicare premiums if they get a higher modified adjusted gross income, according to this Q-and-A article on Los Angeles Times. For example, they will pay $53.50 more for Medicare Part B and an additional $13.30 for Part D if their MAGI exceeds $85,000 ($170,000 for couples).
Ask Larry: Can my ex reduce my Social Security benefits?
A divorcee won't see any reduction in Social Security spousal benefits even if her former spouse had her sign a document, according to this Q-and-A article on Forbes. If their marriage lasted at least 10 years and her former husband is remarried, she will still be entitled to divorced spousal benefits on his record. Moreover, if she remarried after the age of 60, she can file for widow's benefits on his ex spouse's record.