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Bob Williams

Articles by Bob Williams

Retirement Income That Isn’t Taxable

April 5, 2022

One of the questions that have to be answered when planning for retirement is, “Where’s my income going to come from.” Identifying the income is a necessary first step when you’re planning. But people often miss the second step—how much of that income will be taxed? Uncle Sam doesn’t give you a pass on taxes just because you’re retired. Most people even have to pay taxes on their Social Security. If you don’t account for your retirement tax bill, the retirement phase of life may not be as care-free as you expected.
As you’re building a solid retirement income plan that will provide all the money you need, be aware of several types of income that don’t get taxed.
Health Savings Account Distributions
If you have money in a health savings account when you retire, you can use that money to

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New RMD Tables Mean Less Taxes

March 22, 2022

Every little bit helps, especially in the worst inflationary period in 40 years. But for people who have to take Required Minimum Distributions (RMD) from Traditional IRAs, Inherited IRAs, and Retirement Plans, there’s good news. Beginning in 2022, the amount you’re required to withdraw goes down meaning your tax bill on those distributions goes down, too.
People are living longer, so the IRS has updated its life expectancy tables. Under the old tables, a person was expected to live 82.4 years. Now, after the first IRS update to the tables in 20 years, the age has been increased to 84.6 years.
Calculating your RMD remains the same. You apply the IRS factor for your age to the balance of your IRA on December 31st of the previous year and that gives you your current Required Minimum

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How the IRS Taxes Your Retirement Income

March 10, 2022

Oh, the day you can hang up your career and ease into that status you’ve been working toward most of your adult life, the place that brings a smile to your face, your happy place where you no longer answer to an employer, where you set your own schedule—that magical place called “Retirement.” You’ve been saving and planning and getting things in place. But have you planned for the taxes you have to pay on retirement income? Many retirees don’t take that into consideration and are surprised when they end up with less money to fund their retirement lifestyle.
Uncle Sam doesn’t give you a break just because you’re retired. There are federal taxes on Social Security as well as distributions from 401(k) plans and IRAs. And unless you live in Alaska, Florida, Nevada, New Hampshire, South

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6 Common Mistakes That Blow Up Your Estate Plan

February 15, 2022

Saying you need an estate plan is like saying you need to eat your vegetables. You know it’s good for you but there are other things you’d rather do. A survey by shows that in 2021, 25% of Americans ages 18-34 had some type of estate planning document, 22.5% ages 35-54 had a will or trust, and only 44% of people 55 and older had done anything about estate planning.
Even when you’ve put the work into creating an estate plan, your wishes may not be carried out if you fail to keep the plan current. You can’t set-it-and-forget-it. The plan needs to be reviewed regularly to see if the plan still describes the way you want your estate handled.
There are several common ways people can blow up their estate plan.
Not funding a Trust
People spend a lot of time and money to create a

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Knowing if Your Are Financially Ready to Retire

February 8, 2022

Retirement is a magical word. It means different things to different people. Whether it’s traveling the world and never having to work again, beginning a new career or business, or volunteering, you need enough income to pursue your definition of retirement.
How much money do you need? The number is different for every person. But there are certain markers everyone contemplating retirement needs to consider.
How much money have you saved?
Since it was signed into law on August 14, 1935, Social Security was always intended to supplement other retirement income, not be the sole source of retirement income. Today, people save in tax-deferred retirement accounts such as IRAs, 401(k)s, 403(b)s, and a host of other employer-sponsored plans as well as non-retirement accounts. No one wants to

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Ask Bob: Two Confusing IRA Designations

January 31, 2022

“What in the world does that mean?”  I can’t tell you how many times I’ve been asked that question during almost 30 years in the financial industry. Clients naming beneficiaries on IRAs, 401(k) accounts, annuities, or insurance policies stop dead-in-their-tracks when asked to decide whether they want beneficiaries to receive proceeds from their account Per Capita or Per Stirpes. After all, we don’t use Latin much anymore. But picking the wrong option has important implications that can create turmoil and hard feelings among family members after you’re gone.
Let’s say you’re married and have three adult children. Your spouse is probably your primary beneficiary and your kids (we’ll call them A, B & C) are contingent beneficiaries. If your spouse dies first, A, B & C split the proceeds

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What the Tax Man Requires After a Loved One Dies

January 10, 2022

Someone trusts you so much that they name you to settle their estate after they die. You’re honored they have that much confidence in you, but you don’t think much about what’s involved in settling an estate.
Among the long list of items you have to deal with is settling the deceased’s tax bill. You may have to file just one return for the person who’s passed away, but there could be several. Strauss Attorneys, PLLC, an estate planning firm, has published a list of four possible tax returns the IRS may require.
Individual Tax Return
Typically, you’ll need to file a tax return for the deceased, assuming they earned enough income in the year they died to require the filing of an individual income tax return. You’ll file an IRS Form 1040. Unless the deceased lived in one of the nine states

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New Tax Brackets for 2022

December 13, 2021

It seems like you just finished filing your tax return and now it’s almost time to step into the ring with the IRS again. But as you contemplate gathering receipts and tax records for 2021, the IRS is at work adjusting tax brackets for 2022.
The U.S. tax system uses a graduated scale, meaning you pay different percentages on your taxable income. For example, in 2021 you pay 10% on the first $9,950 of what you make, 12% from $9,950-$40,525, and so on.
There will still be seven tax brackets in 2022. The percentages for each bracket remain the same, ranging from 10%-37%, but the amount of income in each bracket will be shifted upward. The Internal Revenue Service increases the brackets every year to adjust for inflation and reduce “bracket creep.” That’s when a taxpayer gets pushed into a

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SPECIAL REPORT: The Definitive Guide to Medicare

December 7, 2021

There’s a common misconception that Medicare is a simple, automatic process when you turn 65. Nothing could be further from the truth. The responsibility to enroll is on your shoulders, and if you miss deadlines or don’t enroll in just the right way, you can incur penalties that will consume chunks of your retirement income for the rest of your life.
Medicare is made up of Part A (Hospital Insurance), and Part B (Medical Insurance). There is generally no cost for Part A, but there is a monthly premium for Part B. If you don’t enroll in Part B when you’re eligible and then enroll later, you’re penalized 10% for every 12-month period you could have had Part B and did not.
Then there’s Part D (Prescription Drug Coverage). That’s not automatic either. If you don’t sign up for Part D when

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The Estate Tax Exemption Amount Increases in 2022, BUT…

December 6, 2021

When the Tax Cuts and Jobs Act of 2017 became law, estate tax exemptions got a substantial boost. The amount each individual could pass on free of federal estate taxes jumped from $5,490,000 in 2017 to $11,180,000 in 2018.  That amount has increased each year since then based on the Consumer Price Index. In 2022, the exemption rises from $11.7 million to $12.06 million per person.
But the 2017 law isn’t permanent. Unless Congress changes the current law, the higher estate and gift tax exemption will “Sunset” on December 31, 2025. Starting January 1, 2026, the exemption will return to $5.49 million adjusted for inflation which means you can pass on approximately $6 million free of federal estate taxes.
So, if there is no congressional intervention, someone dying in 2026, with an estate of

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Medicare Eats Up Most of the 2022 Social Security Raise

November 30, 2021

There was dancing in the streets when Social Security announced that 2022 checks will go up by 5.9%, the biggest Cost of Living Adjustment (COLA) in 40 years. But now, the streets are empty and the cheering is gone. Most of that Social Security COLA will be eaten up by increases in Medicare.
Medicare Part B, which covers doctor services and outpatient care, will go up by 14.5% which is the largest Medicare increase ever. This year the monthly premium for Medicare Part B is $148.50. Next year that jumps to $170.10, more than double what Medicare Trustees estimated back in the summer. In addition, the Part B deductible is going up, from $203 this year to $233 in 2022, an increase of 14.8%. But that’s not all. The Medicare Part A deductible goes up $72, from $1484 to $1556. Part A covers

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2021 Year-End Investment Checklist

November 29, 2021

The end of the year is a financial opportunity—an opportunity to take advantage of remaining tax breaks and keep Uncle Sam’s hand from going deeper into your pocket than it has to, and an opportunity to clean up your portfolio and make sure your financial house is in order. Here is a year-end financial checklist.
Tax Loss Harvesting
What losses are in your portfolio? It may be to your advantage to take them and offset capital gains you realized earlier in the year. When you’ve reviewed an investment that’s worth less than you paid for it ask yourself if you’d buy the same investment today. If not, sell it. Don’t hang on to it hoping it will, someday, be back to where you bought it.
But if you have losses in investments you really like, but could use the loss, keep in mind the Wash Sale

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Ask Bob: What Do I Do About Long-Term Care?

November 22, 2021

Healthcare during the senior years, especially the topic of long-term care, has been talked about and analyzed ad nauseam. And from all the research, one thing is clear. If you need long-term care, it will be expensive in both dollars and emotions.
Here are a few of the most recent statistics about long-term care in America:

70% of people turning 65 will need some type of long-term care services in their lifetimes
48% of people turning 65 will need some type of paid long-term care services
34% of people turning 65 will require paid long-term care for more than two years
15% of people turning 65 will spend more than two years in a nursing home
Women needing long-term care will need it an average of 3.7 years
Men needing long-term care will need it an average of 2.2 years
9% of residents

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Does Your Estate Plan Cover Your Bank Accounts?

October 21, 2021

You just got the final draft of your estate plan. You’ve been thinking about this for a long time—how you want your estate distributed, who you want to take care of, who you want to benefit. As you scan the document, it includes your exact wishes for disposition of all the major assets; stocks and bonds, property, business ownership. But does the plan say anything about bank accounts?
Since bank accounts are not always major assets, they can be overlooked and not included in an estate plan. To make sure money in those accounts is distributed according to your wishes, it’s important to know the ins and outs of bank account registration and ownership. Then verify that your accounts are titled in a way that meets your criteria.
Individual Account
Individual accounts are owned by only one

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Medical Expenses Retirees Can Deduct

October 20, 2021

Like most people, I don’t want to pay more taxes than necessary. That common-sense approach to money began when I got my first job at the age of 13. I was paid $1.50/hour, slightly above the $1.30 minimum wage. I calculated exactly how much my first paycheck would be. But when I got it, somebody must have used new math, because the check was less than it was supposed to be. Why? My boss calmly explained, “We have to withhold federal income taxes.”
Now, many years and many paychecks later, I’ve learned to look for every legitimate tax deduction available to me. For retirees who itemize on Schedule A, medical expenses are a great place to look for deductions. You can deduct qualifying medical expenses that exceed 7.5% of adjusted gross income. Here are some specifics.
Long Term Care
If you

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The Medicare Star Rating System—Help to Choose the Right Plan

October 19, 2021

Talk to anyone who’s about to go on Medicare and they’ll tell you that figuring out what plan to choose will make you pull your hair out (which is probably not covered by Medicare). There are so many things to consider, from drug coverage, to copays and coinsurance, emergency room visits, hospital stays, the network of available doctors, the network of available pharmacies, and whether a plan provides any form of dental, vision, or hearing coverage. It can be very confusing.
While you’re doing your own research, you’re also bombarded with a blizzard of mail from every company that wants to sell you a Medicare plan, not to mention all those painfully long TV Commercials telling you that THEY know what’s right for you.
Wouldn’t it be nice if there was a way to compare plans? Well, there is.

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Estate Planning Review

October 11, 2021

We’ve been focused on Covid for so long that a lot of things have taken a back seat. We’re still regrouping, trying to find the new normal. Estate planning is one of the things that’s easy to forget in this new normal. Why not? You did the estate planning, you listed your wishes, and you put the document in a safe place to be pulled out when the inevitable happens.
But if there’s one thing Covid taught us—the unexpected can happen and things change. That’s why now is a great time to pull your plan out of the dusty archives and review it. Have there been significant life changes such as marriage, divorce, new kids, or grandkids? Have you moved? Have estate laws changed? Do you want your assets distributed differently than when you created the estate plan? Do you need to change beneficiaries

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The Sunny Side of Inflation – Maybe

September 29, 2021

It may not be public enemy number one, but inflation is certainly near the top of the list. Since the beginning of 2021, prices of almost everything have gone into orbit. Energy prices are up an average of 56%. Airline tickets are up almost 25%. Used car prices have jumped more than 45%. And it seems there’s no slowdown in the accelerating prices of groceries, real estate, rents, health care, and lumber. Inflation is pulling money out of consumer pockets at a faster rate than their income is growing.
For Social Security recipients, a little help is on the way. By all estimates, next year’s Social Security cost-of-living adjustment (COLA) may be the highest since 1983. Based on consumer price index data from the Bureau of Labor Statistics, Moody’s Analytics estimates an increase of 4.5%

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Paying More Taxes Because Your Spouse Dies

September 27, 2021

It’s one of the most obscure taxes in the IRS code, but it can be one of the most devastating at a time when you can least afford it. It’s called the Widow’s Penalty Tax—a stealth tax you never see coming—that can cause a widow or widower to struggle financially.
When one spouse dies, the surviving spouse is now responsible for all the bills and has to maintain the household with less money. The household begins receiving only one Social Security check instead of two. If the deceased spouse was receiving a pension, it may disappear or change to a reduced amount.
On top of that, the surviving spouse is pushed into a higher tax bracket. When both spouses are alive, the couple’s tax return filing status is married filing jointly. But after one spouse passes away, the surviving spouse’s filing

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Medicare Planning and How to Pick the Right Plan for You

September 7, 2021

Medicare is a veritable alphabet soup of choices. There’s Part A, Part B, Part C, Part D, and when you get into Medicare Supplements, there are 10 options—A, B, C, D, F, G, K, L, M, and N. Make the wrong choices and you could be hit with lifetime penalties that drive up your Medicare premiums and a Medicare plan that doesn’t give you all the benefits you could have. Constructing a Medicare plan that’s right for you requires research, planning, and asking the right questions.
When Medicare was signed into law on July 30, 1965, there were just two parts, Part A and Part B. They are referred to as Original Medicare and still exist today. Parts A & B cover approximately 80% of your healthcare costs. Anything above that comes out of your pocket.
Medicare Part A
Medicare Part A is hospital

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Fiduciary vs Suitability Standard

August 30, 2021

Today we hear the word fiduciary tossed around as some concept that means the same thing by everyone who utters it. Nothing could be further from the truth. A fiduciary, according to Investopedia is:
… a person or organization that acts on behalf of another… putting their clients’ interest ahead of their own, with a duty to preserve good faith and trust. Being a fiduciary thus requires being bound both legally and ethically to act in the other’s best interests.
Well, you say, shouldn’t anyone who handles my money act in my best interest, whether they carry the title of advisor, adviser (yes one letter makes a difference), manager, or representative? Of course, they SHOULD, but not everyone does.
There are two terms in the world of investing that often get confused; the suitability

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Spousal Lifetime Access Trusts—a Treasure Chest for Married Couples

August 16, 2021

There’s an old axiom that says, “All good things must come to an end.” And unless Congress makes some changes, that’s what will happen to the current level of the federal estate tax exemption. As it stands now, every individual can give away $11.7 million of their estate free of inheritance and gift taxes. Married couples have a combined exemption of $23.4 million. The gifting can happen during their lifetime or at their death.
The current exemption amount is at an all-time high, but it’s set to decrease to $5.5 million on December 31, 2025, when the sunset provision of the law kicks in. It may fall even further, to $3.5 million if the current administration gets its way. Additionally, there is talk about increasing the inheritance tax rate above its current level of 40%.
But all is not

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Embracing Social Security Online

July 19, 2021

Customer service is mostly dead. It’s probably housed in the Smithsonian along with the T-Rex and TV rabbit ears. As technology has progressed and Millennials have come of age, we have been pushed, sometimes kicking and screaming, to conduct personal business online.
The Social Security Administration is no exception. Call the SSA and you will hear, “Offices are open to provide limited in-person services by appointment only. We continue offering services by phone and online. You can find the Social Security Administration online at”
The number of Senior Citizens without computers is dwindling. More Americans entering their senior years have at least a modicum of computer know-how. And for all my ranting here, it’s certainly less frustrating conducting Social

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4 Potential Pitfalls of Working During Retirement

July 15, 2021

Mom and Dad told us working was a good thing. It may not have seemed like it as kids when they were trying to turn us into fully functioning, responsible adults. But later in life, we discovered it was true.
Working gives a sense of pride and accomplishment. It makes us independent. Many older Americans continue to work during retirement for those reasons, as well as being able to contribute from a lifetime of experience, having social interaction with other people, or just having something to do. But without advance knowledge and planning, that paycheck may create some unpleasant consequences.
Taxes on Social Security
There is a long-standing myth that Social Security benefits are not taxed. And that’s what it is—a myth. If you work during retirement and the amount you earn along with

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The SECURE Act Retirement Plan Rules

June 29, 2021

Why make it simple when difficult will do. That seems to be the motto of the Setting Every Community Up for Retirement Enhancement (SECURE) Act, even in its title. The SECURE Act has been the law of the land since January 1, 2020, and the 125 pages of reforms were, allegedly, supposed to make saving for retirement easier and more accessible for many Americans.
The SECURE Act makes changes to defined contribution plans such as 401(k)s, defined pension plans, IRAs, and 529 college savings accounts. Some of the changes are an improvement while others seem like nothing more than forcing people to pay taxes more quickly, specifically inherited IRAs.
Among the positives:

Required Minimum Distributions (RMD) now begin at age 72, not 70 ½ as before. Currently, there is a bill before Congress

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How the Social Security Earnings Test Can Work Against You

June 7, 2021

The checklist when preparing for retirement is a long one. But you need to be aware of one item in particular if you intended to start taking Social Security before your Full Retirement Age (FRA) and continue working—the Social Security Earnings Test. It can suck Social Security dollars out of the pockets of unsuspecting retirees. To paraphrase a familiar old adage, the government giveth and the government taketh away if you earn too much.
Annual Social Security Earnings Test
Until you reach Full Retirement Age, your Social Security benefit will be reduced if you are working and earn more than a government-set threshold, which generally increases every year.  In 2021, that threshold is $18,960. Earn more than that and Social Security takes back $1.00 for every $2.00 you earn above the

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Getting The Estate in Order

April 19, 2021

Covid-19 has changed life forever in more ways than we can count. It has also changed end-of-life estate planning and estate modification. It can be very difficult having that conversation with a spouse who’s dying.
Estate planning conversations are often put off because they are a reminder of the inevitable for every mortal on the planet. But when one spouse is dying, the other spouse often realizes that estate issues need to be addressed before death occurs. What should you do?
Review estate plans currently in place
You may have forgotten some of the details of the current estate plan. Read through the documents and refresh your memory so you know exactly what needs to be done. You may want to review the current plan with your advisors and get their input on whether changes need to be

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New IRS Rule Helps Protect Your Tax Refund from Scammers

April 12, 2021

Identity theft is one of the major plagues of modern society costing its victims billions of dollars and untold man-hours to recover from it. In 2020, 1.4 million Americans were successfully attacked, which translates into a victim every 3 seconds.  That’s more than double the number from the year before. Sophisticated scammers are breaching the walls of major corporations and individuals alike, and the information they steal gets traded on the dark web like pieces on a monopoly board.
Armed with stolen identities, digital thieves have found a lucrative market at the IRS, stealing tax refunds. Imagine waiting and waiting on your tax refund only to be told that it’s already been sent and the check cashed—by someone else! In 2020 the IRS discovered $2.3 billion dollars in tax fraud schemes.

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