Our daily roundup of retirement news your clients may be thinking about.
Should the U.S. raise the age for required IRA distributions?
Some experts are floating the idea to change the age at which retirees should start taking required minimum distributions from their tax-deferred accounts, according to this article on MarketWatch. These experts say that people are living longer past the age of 70 and they should not be forced to make unnecessary taxable withdrawals. However, other analysts want to stick to the existing rules. Two experts --an IRA specialist and an investment officer-- weigh in on the proposal.
A tax penalty for I.R.A. withdrawals can sneak up on you
Retirees who turned 70 1/2 last year should make sure that they take the first required minimum distribution from their IRA before April 1, according to this article on The New York Times. The tax penalty for missing the deadline is 50% of the total RMD amount, and they will have to take another RMD for 2017 before the end of the year, which could push them to a higher tax bracket. The IRS may waive the penalty for older retirees who failed to take their annual RMD by Dec. 31 if they file Form 5329 and present a valid reason for missing the deadline, says an expert with Fidelity.
What is the maximum Social Security tax in 2017?
The amount of annual income subject to 12.4% Social Security tax has increased to $127,000 this year, according to this article on Motley Fool. This means that workers whose income exceeds this amount will owe additional taxes. For example, a worker with $130,000 in income this year will face $539.40 in extra payroll taxes. However, private employees get to pay just half of their Social Security taxes, as their employer is required to cover 50% of their taxes.
When it's finally time to retire but you can't spend your savings
Transition to retirement can be challenging for many people as they find it hard to shift from saving to spending the money in their nest egg, according to this article on CNNMoney. To better enjoy their savings, retirees should focus less on spending and more on the things that will make them enjoy their post-career life. For example, they should engage in activities that allow them to experience new and productive things, or they may get involved in charitable events to help other people.
Ask Larry: My ex is on to marriage no. 3. Does that impact my benefits from him?
A 60-year-old divorcee is entitled to Social Security divorced spousal benefit on her former husband's record if she did not remarry after their marriage of 18 years, according to this article on Forbes. Her divorced spousal benefit will not be reduced even if her ex-spouse remarried more than once. Moreover, she can file for a widow's benefit once he dies, even if she remarries, as long as she was older than 60 at the time she married her second husband.
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