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Corrupt Government Title: Retirement Planning and Obama’s 2016 Budget Retirement Planning and Obama’s 2016 Budget February 23, 2015 President Obama's 2016 budget was revealed to the public earlier this month, and according to the White House, a few of its main goals are to improve access to childcare and education, reform the tax code, ensure access to healthcare and support upward mobility. While backers also say the budget will make it easier to save for retirement, experts have mixed opinions on its potential effects on seniors. A few of the more controversial proposals involve IRAs and Roth IRAs. For instance, the budget proposes to eliminate the “stretch” IRA, requiring most non-spousal beneficiaries to clean out their inherited accounts five years after the owner's death. Without the ability to extend those distributions—something most inheritors do today—tax deferrals would be drastically reduced, and beneficiaries could be abruptly bumped into higher tax brackets and denied a variety of deductions. While this change would certainly save the government money on tax benefits that would have been above and beyond those promised to the account creators themselves, there's no denying its negative impacts on inheritors. On the other hand, the budget would also include a hardship exception to the typical ten percent penalty for early withdrawals. As it stands, the exception would cover people who've received unemployment for over 26 weeks, allowing them to withdraw up to $50,000 per year from IRAs and employer-sponsored plans. “I think this will probably pass because neither side of the House wants to strip out something that will help people in hardships,” said Brooks Stahlnecker of the Stahlnecker Group. “If anything, though, this will just create bigger hardships down the road, and people won't have as much on the back end when they finally retire.” In an effort to simplify the rules regarding required minimum distributions, the budget also proposes RMDs for Roth IRAs. “The Roth was brought about with no RMD, and lots of clients transitioning into it to leave money to the next generation,” said Stahlnecker. “The stated reason is to make it easier for people to understand the rules, but still they flip-flopped and want to strip the RMD for people with $100,000 or less in a qualified plan.” Overall, high wage earners who want to leave inheritances will be most affected, and they and their advisors may need to find new ways to set aside funds for the next generation. Also a potential negative for high earners is the proposal to cap the deduction on tax-qualified contributions at 28 percent, disallowing those in higher tax brackets from taking the full deductions they currently enjoy. This measure would effectively put a cost basis on those contributions, creating a multitude of accounting complications. Investors who exceed that maximum deduction will “inevitably have to look at non-qualified investments, though there are still ways to make those tax-deferred,” said Stahlnecker. Aside from the direct impacts on individuals' retirement accounts, the budget could require businesses to offer automatic enrollment into payroll-deducted IRAs if they don't already offer other plans. The current proposal is that money would be set aside to implement state-based auto-enrollment programs, and that tax credits would be offered to small businesses that participate. “The good thing about this is that the federal government is finally providing some backing to the idea, and it's not going to cost the states themselves a whole lot,” said Jamie Hopkins, Associate Director of the New York Life Center for Retirement Income. “People will be able to opt out, but it will encourage more people to save.” While IRAs are receiving the brunt of attention from retirement-minded advisors and investors, Obama's budget would also eliminate the decades-old tax break for net unrealized appreciation, one of the biggest breaks for clients heavily invested in retirement accounts. “This would have a huge impact on people who leave their employers with a lot of 401(k) money in their employers' stock,” said Hopkins. Provided they follow certain rules, these retirees can currently pay the long-term capital gains tax in lieu of income tax on portions of their retirement account distributions. Participants 50 and older would still be able to take advantage of the break once they retire, but younger investors would not. In an effort to “eliminate aggressive SSA claiming strategies,” the budget might also curtail measures such as “file and suspend,” which allow married couples to take advantage of both spousal benefits and delayed benefits. ”The benefits of file and suspend may be actuarily equivalent to others, but it certainly makes more sense if you and your spouse are healthy and well-off,” said Hopkins. The budget doesn't get into the specifics of how it's going to eliminate those “aggressive” strategies, however, so retirees will need to keep a look out until the White House and Social Security Administration provide further information. Although the budget's passage and final provisions are still up in the air, there are a few ways clients can prepare themselves for impending changes. Setting up retirement accounts sooner than later is a great start. “There's a good chance a lot of the IRA rules will grandfather in existing IRAs and Roth IRAs, so setting something up today could be a really good move,” said Hopkins. “Even if measures like the stretch IRA elimination don't come into effect, it won't hurt to have it.” It's also critical for clients and their advisors to understand and take advantage of current Social Security rules. “The biggest impact of the budget's Social Security proposals is that you just need to educate yourself on withdrawal techniques and know exactly when you'll take it,” said Stahlnecker. “People spend more time planning their family vacations than they do planning their distribution strategies, and they could be leaving a lot of money on the table.” Finally, when advising middle-aged clients who may feel the effects of the 2016 budget years down the road, it's important to simply stay educated, watch out for new legislation and avoid rash decisions. “You've got to just stay the course and adjust as necessary,” said Stahlnecker. “Keep clients educated, stay educated yourself and weather the storm accordingly.”
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#1. To: CZ82 (#0)
I am certainly no expert. But one thing is perfectly clear. Fed, State, & local govt's will continue to increase spending, will continue to increase their debt, and will continue to increase taxes. Oh, and will continue to allow more foreigners into the US, and add them to program roles. This will continue to devalue the purchasing power of the dollar. Also, any investments you have that are denominated in dollars will continue to decline in value. It will make it increasingly more & more difficult for you to retire. By necessity, you will not be able to leave your job, or require you to find another job, and then work until you die. Be sure to thank your R's & D's. They will continue to live like royalty, at YOUR expense. SPIT
Si vis pacem, para bellum
Some State and local governments seem to be taking the hint and are figuring out which unnecessary programs and expenditures that need to be cut or done away with. My property taxes have stayed pretty constant the last 8 or 9 years now, and State income tax has went down by 10% over the course of the last 3 years. But they did raise sales tax by 1/4 percent to help offset the other reductions.
“Political correctness is a doctrine, fostered by a delusional, illogical minority, and rapidly promoted by mainstream media, which holds forth the proposition that it is entirely possible to pick up a turd by the clean end.”
Typical tyrannical governing.
“Political correctness is a doctrine, fostered by a delusional, illogical minority, and rapidly promoted by mainstream media, which holds forth the proposition that it is entirely possible to pick up a turd by the clean end.”
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