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Beware of hidden taxes in retirement: Retirement Scan

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Beware of hidden taxes in retirement
Retirees may face a more complicated tax situation than when they were still working, according to this article on The New York Times. For example, a portion of their Social Security benefits may be taxed at the federal level if their combined income, which is their adjusted gross income, plus any non-taxable interest and 50% of their benefits, exceeds a certain limit. Their retirement benefits may also be subject to state income taxes. Those who reach the age of 70 1/2 will have to take mandatory distributions from tax-deferred accounts that could boost their taxable income.

The 2018 Social Security Trustees Report contains no surprises
This year's Social Security Trustees Report has the same message as last year's, and that is the program is likely to exhaust its trust funds by 2034 if Congress fails to act, writes Alicia H. Munnell, director of the Center for Retirement Research at Boston College, on MarketWatch. "Regardless of how we got here; we are where we are," writes the expert. "The bottom line is that Social Security faces a manageable financing shortfall over the next 75 years, which should be addressed soon to share the burden more equitably across cohorts, to restore confidence in the nation’s major retirement program, and to give people time to adjust to needed changes."

Want a bigger retirement nest egg? Get $24,000 more with 1 simple move
Although IRA investors have until April the following year before the tax-filing deadline to make contributions, they should avoid procrastinating and instead contribute the amount they intend to make as early as January, according to this article on Motley Fool. This strategy will maximize the power of compounded growth on their savings and the difference could be more substantial than they expect.

Forgot to withdraw from your retirement account? How to avoid that killer penalty
Retirees who are at least 70 1/2 should ensure that they take the mandatory distributions from their tax-deferred retirement accounts or they face a hefty penalty, according to this article on CNBC. Those who failed to take the required minimum distributions from these accounts before the deadline are advised to explain the reason to the IRS using the 5329 form. The IRS usually forgives retirees for the failure especially if the reason is valid. "In all my years, I have not heard of a case where someone confessed their sins and did not get forgiveness," says a CPA.

Ask Larry: Should I file and suspend my Social Security retirement benefit or wait until 70?
A wife who considers retiring from her part-time job does not need to file for and suspend her Social Security retirement benefits, according to this Q-and-A article on Forbes. She also should not defer her retirement benefits until she turns 70 and will be better off collecting her benefits when reaches her full retirement age, as her retirement benefit rate will be lower than 50% of her husband's full retirement benefit.

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