What strategies can you use to increase you and your spouse’s joint lifetime Social Security benefits?

The file & suspend strategy puts a married couple in the position of receiving maximum Social Security benefits at age 70, with one spouse able to claim some of the benefits at their full retirement age.

As an example, if your full retirement age for a couple 66 and one spouse, let’s say the husband in this instance, claims Social Security at age 66 but then elects to suspend his benefit entirely, the wife can claim a monthly spousal benefit (roughly 50% of her husbands benefit) when she reaches 66.

This is accomplished by filing a restricted claim for a spousal benefit only at that time.  So while some spousal benefits are coming in, the couple has elected to put off receiving their own Social Security benefit until age 70.  This will allow them to collect the delayed retirement credits of 8% annually between ages 66 and 70.  At age 70 each spouse will be entitled to collect their own enhanced benefits.

Social Security planning pays off!

With all the concern over the impending fiscal cliff, not much attention has been given to the new IRA contribution limits for 2013.  Due to the cost of living adjustment, the maximum total contribution for IRAs has increased from $5,000 to $5,500 for those younger than 50 years old in 2013.  The total catch-up contribution amount has also been increased from $6,000 to $6,500 for individuals older than age 50.

There is still no income limit on traditional IRA contributions. However, there are income limits for those who seek tax deductions for those contributions. If you are a married couple and you are both covered by employer plans, you can get a tax deduction for your traditional IRA contribution if your modified adjusted gross income is less than $95,000. The available tax deduction phases out at $115,000.  If your modified adjusted gross income is between $95,000 and $115,000, a partial tax deduction is available.

Roth IRA contributions, however, do face income limits. Single taxpayers with incomes less than $112,000 (and married taxpayers making below $178,000) can make a full contribution to their Roth IRAs.  However, if your earnings are above $127,000 (or $188,000 for married couples), a Roth IRA contribution is not available to you.  Individuals and couples whose modified adjusted income falls between these amounts could be eligible for partial Roth contributions.  As always there are no tax deductions available for Roth IRA contributions, as gains grow tax free.

Last fall I made a concerted effort to inform clients that if they were interested in permanent guaranteed life insurance, they needed to get their applications in and dated before December 31, 2012 as premiums were slated to rise between 8% and 20% on January 1, 2013.

Just as predicted, most of the companies have announced price increases, some quite significant.  However, it seems that there are a number of companies that have not yet announced price increases; they were strong enough to meet the reserves required by law for the time being. But, Tom of Pittsburgh Brokerage Services, thinks it is only a matter weeks or maybe months, until those price increases are announced.

As such, if you are interested in permanent guaranteed life insurance, there is still time to lock in the lower 2012 prices before the last companies announce their rate increases.

If you have insurance and are wondering if you are sufficiently insured, or if you think you may need insurance, and you want to lock in yesterday’s rates while they last, please call Alice to schedule your free insurance evaluation.  412.521.2732

2013 brings plenty of financial changes from tax rates to property assessments. What impact will these changes have on you? What impact will they have on Pittsburgh?

Join us this evening at 7:05 pm on
KQV 1410 AM.
Program also streams live at www.kqv.com

On tonight’s The Lange Money Hour, CPA Jim Lange welcomes Pittsburgh City Controller, Michael E. Lamb, to the KQV studios.

Managing Pittsburgh’s financial affairs for the last five years, Controller Lamb has put a focus on making City government more transparent. He created www.OpenBookPittsburgh.com, a website that lets citizens search and view all City contracts, as well as campaign contributions and expenses for all candidates running for office in Pittsburgh. Controller Lamb also released Pittsburgh’s first Popular Annual Financial Report (PAFR), a user-friendly document that provides a clear picture of the state of Pittsburgh’s finances, demographics and government.

It is sure to be an engaging and informative hour. Since the show will be live, you are welcome to join the conversation by calling the KQV studios at 412-333-9385. You can also e-mail questions to jim@paytaxeslater.com. Please put The Lange Money Hour in the subject line.

If you are not able to tune in tonight, KQV will rebroadcast the show on Sunday, January 6th and 13th at 9:05 a.m. The program will also be available soon at www.paytaxeslater.com, in the archive of The Lange Money Hour presentations

If no agreement is reached, tax rates on income, estates, gifts, capital gains and dividends will increase.  There are specific action points to protect your family from each potential increase.  Please understand that I am realistic enough to recognize that going over the cliff, (meaning there won’t be any meaningful changes to the tax laws before year-end) it is possible, even likely, that there will be some compromises after year-end.  Of course, advice will vary from taxpayer to taxpayer.  In addition, these recommended action points may be inappropriate for you depending on your situation and what tax changes will occur before year-end, and changes after year-end.  Obviously, if appropriate, we encourage you to seek individual attention with your trusted advisor, CPA, attorney, etc.  Our office will make every effort to accommodate your needs even if we have to work evenings and weekends.

For the Emergency Fiscal Cliff Survival Guide follow this link: https://paytaxeslater.com/eblast/2012_12_27/

If you missed the show last night, it’s not too late!  Tune in to KQV news radio 1410AM to listen to the encore presentation on Sunday Morning at 9:05!  Ed and Jim discuss lots of key retirement and planning issues that you wont want to miss!

We hope all of you are safe and warm this morning.  It looks like the storm in Pittsburgh turned out to be less severe than we thought it was going to be and for that we are thankful.  With all the flooding, power outtages, injuries and even deaths that Hurricane Sandy caused, we feel very lucky not to have born the brunt of it.  Our thoughts are with those who have.

It’s days like today, looking at the deaths that this storm has caused, the injuries, the damage to homes and businesses, that we realize how important what we do, financial planning, estate planning, insurance, etc really is.

Which Assets Should I Spend First?

As a retiree, you may be fortunate enough to find that your Social Security, pension, minimum required distributions from your IRA, and dividends and interest on your after-tax investments provide enough funds for your living expenses. However for many that is not the case. You may be required to either tap into your after-tax funds or make taxable withdrawals from your IRA or retirement accounts to make ends meet.

In general it’s preferable to spend principal from your after-tax investments rather than taking taxable distributions from your IRA and/or retirement plan.  Leaving money in the tax-deferred environment for a long as possible confers advantages that almost always outweigh concerns over paying capital gains on your after-tax assets.

The optimal spending order is first your after-tax dollars, then your IRA dollars and then your Roth IRA dollars.

( Taken in large part from Section 4 of Retire Secure! by James Lange)