How to make the tax system fairer and save Social Security: Retirement Scan
Our daily roundup of retirement news your clients may be thinking about.
How to make the tax system fairer and save Social Security
The federal government should consider taxing the health insurance that employers provide to their employees to generate extra revenue that can be used to fix Social Security's financial woes, writes Martin Feldstein, a professor at Harvard University, in the Wall Street Journal. Taxes on these benefits could produce additional $135 billion this year alone, writes the expert. "Expanding the payroll tax would improve the fairness of the tax system while shrinking the overall budget deficit and strengthening Social Security. It should be part of the tax-reform legislation Congress enacts later this year."
3 retirement savings mistakes that could cost you $100,000 or more
Missing out on the tax benefits of retirement accounts can be a costly mistake for investors, as they could save considerably on these tax breaks, according to this article on Motley Fool. 401(k) participants may also make the mistake of leaving free money on the table by not taking advantage of their employer's 401(k) matching contributions. Another misstep that could cost retirement investors is to choose investment options that charge high fees.
10 things you need to know about health savings accounts
Although clients have no medical expenses at present, contributing to a health savings account can be a smart financial move, according to this article on Kiplinger. That's because it enables them to get tax benefits while saving for their medical costs in retirement, and the HSA offers more tax breaks than a 401(k) plan. HSAs offer tax deductions for the contributions, tax-deferred growth on savings, and tax-exempt withdrawals for qualified medical expenses.
Newborns would save $2.2 million for retirement with this idea
An expert says that allowing parents to save for their newborn child's retirement via a Child IRA can help Americans secure their golden years, according to this article on CNBC. The child whose parents contributed $1,000 to his or her Child IRA could end up with $2.2 million in the account by the time he or she reaches the age of 70 if the account generates 8% in average annual return, says the expert. "We let parents and grandparents save for their kids' college expenses [in tax-advantaged 529 college savings plans] without requiring the child to have income. Why don't we let them save the same way for their kids' retirement?"
Ask Larry: Will back taxes increase my benefit?
A client cannot boost his or her Social Security benefit by paying payroll taxes on past income earned from an overseas job even if he or she had reported the earnings to IRS, according to this article on Forbes. The income could be exempted from Social Security taxation under the law. Moreover, the clients should pay the Social Security taxes within three years, three months and 15 days from the end of the year in which the income was earned so that Social Security can include the earnings to his or her record.