Can Social Security be fixed?

Despite the fears stoked during an election year, Social Security is not going away. However, there is a need to shore up the system’s finances because according to the latest report from the Social Security and Medicare Boards of Trustees, the trust fund that supports retirement benefits is expected to be exhausted by about 2034.  If nothing is done, there is only expected to be enough money flowing through the system to pay 76% of the benefits. For a primer on how the Social Security system operates see our post “Can you count on Social Security?”

There are a variety of ways Congress can adjust Social Security so benefit reductions in 2034 will not be necessary. None of these adjustments are particularly popular. You can get an idea of what can be done and create your own hypothetical plan and by playing The Social Security Game developed by the American Academy of Actuaries.

Making News…


Derrick Chandler, CFP, fee-only financial advisor OrlandoWe continue to help the Orlando Sentinel with reader questions by participating in a free call-in hotline and its Ask An Expert feature. (Some links require a subscription to view.) Mike Salmon, CFP®, Charlie Fitzgerald, CFP®, Derrick Chandler, CFP®, and Tommy Lucas, CFP® participated in and answered questions from callers on donating cemetery plots, new rules on inheriting IRA accounts,  Required Minimum Distributions from Roth IRAs, and Qualified Charitable Distributions from IRAs.

Dan Moisand,CFP® continues to write for MarketWatchFlorida Todayand Financial Advisor:

To get more return on bonds, you must accept more risk

I want to take some profit from a mutual fund investment. Can I do it without taking bath on taxes?

Financial Q&A: Charitable donations may mean more in 2020

When can I start making charitable donations from my IRA?

What are the rules for inheriting an HSA?

We have two inherited IRAs, one for a spouse and one for adult children — can you help us figure it out?

When my dad died I inherited my uncle’s IRA. How do I figure out the RMD?

Can I harvest a loss without breaking the wash sale rule?

I want to close my Roth IRA — when can I do that?

Should I sell ahead of the election?

Can I reject an inheritance?

In the News…


In a Money magazine piece,  “The Problem With Buying Bundled Life and Long-Term Care Insurance,” Dan discusses the pros and cons of trying to cover long term care costs with life insurance policies. While there are some circumstances in which the policies could be handy, it is generally more efficient to simply buy long term care insurance and avoid the costs of the life insurance elements.

Things We Found of Note


Panic has a price. A Vanguard study tracked 32,000 do-it-yourself Vanguard fund owners that went to cash between February 18th (the pre-Covid market high) and May 31st of this year.  A whopping 86% of these “cash panickers” would have been better off on May 31st if they had done nothing. If the study looked further into the summer, the results would have been even worse.

 

2021 Retirement Plan Limits, Tax Rates, Tax Brackets, and Standard Deductions

The Internal Revenue Service (IRS) has announced cost-of-living adjustments for 2021. Here are a few highlights:

  • 401(k) Deferral Limit – No change. Limit stays at $19,500
  • 401(k) Catch-up Deferral Limit – No change. Limit stays at $6,500
  • Defined Contribution Plan Maximum Annual Additions – Increase from $57,000 to $58,000 (or $64,500 with catch-up)
  • IRA/Roth IRA Contribution Limit – No change. Remains $6,000
  • IRA/Roth IRA Catch-up Contribution Limit – No change. Remains $1,000

For changes to limits affecting other plans see the IRS announcement of 2021 Limitation Adjustments.

The IRS also released the 2020 Tax Tables and Brackets. The rates have not changed but the brackets have been adjusted for cost of living increases. The standard deduction is slightly higher. This summary hits the highlights.

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Moisand Fitzgerald Tamayo, LLC is an Orlando, FL and Melbourne, FL based fee-only financial planner serving central Florida and clients across the country. Moisand Fitzgerald Tamayo, LLC specializes in providing objective financial planning, retirement planning, and investment management to help clients build, manage, grow, and protect their assets through all phases of one’s life and the many transitions in between.

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Important Additional Information & Disclosures


Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Moisand Fitzgerald Tamayo, LLC-“MFT”), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. 

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About Dan Moisand

Dan Moisand is a fee-only financial advisor with Moisand Fitzgerald Tamayo, LLC. He is a regular contributor for multiple outlets, including Florida Today, MarketWatch, and The Wall Street Journal. His writing and financial advice have also been featured in Financial Planning, Investment Advisor, Wealth Manager/Advising Boomers, Forbes, Smart Money, and The New York Times, among other publications. He is the only two-time winner of the Journal of Financial Planning’s “Call for Papers” competition and has been named a top financial planner and advisor by multiple publications. Investment News named Dan one of the “twenty most influential men and women” in the history of financial planning. He currently serves on the Board of Directors for the CFP (Certified Financial Planner) Board.

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