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.
We 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.
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
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.
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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