Life Insurance Awareness Month is a month to put the spotlight on Life Insurance and how it can help prevent financial catastrophes for families. This year’s spokesperson is Boomer Esiasion:
When you put a retirement plan together some of the things that you have to address are how to handle inflation, healthcare expenses, market volatility, and taxes. One derailer of a successful, happy retirement can actually happen many years earlier in your teens and early 20’s – Student Debt.
A study was recently published that compared households with an average student loan debt of $53,000 to those who carried no such debt. The average lifetime wealth loss was $208,000 with $134,000 coming out of retirement savings. Not having that $134,000 can mean the difference from a comfortable retirement to one that is a struggle.
Last month I published an article about the rules and options for college funding. Saving as early as possible and taking advantage of plans like 529’s are the best way to help pay for your child’s education and ensure that the impact to their retirement due to student debt is minimized.
Back in July I posted that I was opening a “Financial Help Desk” to my network where they could ask me any type of financial question and I would try to help answer it. The program was such a great success (in my best Borat voice) that I decided to create a LinkedIn group where anyone could join to discuss things going on in personal finance or investments. I would like to invite you to the group to ask questions, participate in discussions, or simply read the posts and take in the information.
I hope to see you in the group
Last year’s 5-4 Supreme Court ruling left the Patient Protection and Afordable Care Act (PPACA) intact and questions have been swirling on everything as to how the chronically uninsured will receive insurance, and how some small businesses will be compelled to wade through a sea of new rules and regulations.
Moreover, high-income earners and investors are also asking questions, since they will likely be forced to grapple with a new set of taxes. One major source of new revenues that will be imposed by PPACA, is centered around two new Medicare taxes.
The Net Investment Income Tax
A 3.8% surtax on unearned income
The Additonal Medicare Tax.
An additional 0.9% Medicare tax that will be levied on wages
Net Investment Income Tax
A 3.8% surtax on unearned income that took effect on January 1, 2013
The tax will be applied against the lesser of the taxpayer’s net investment income or modified adjusted gross income (MAGI) in excess of the threshold amounts.
Keep in mind that the 3.8% surtax is in addition to ordinary income tax and any alternative minimum tax.
Income subject to surtax
Let’s look at which types of income are subject to the tax and which are not.
Unearned income will be subject to the tax. This includes gross income from:
Strategies that should be considered
The bottom line
The new maze of complexity will create an extra level of frustration for many high-income investors. It’s unlikely the levies can be completely avoided, but with prudent planning, you can face the 2013 tax season armed with knowledge that eliminates unwanted surprises.
For additional information and before making any final decisions, please consult a tax advisor.