The Trump administration unveiled its proposed budget that includes provisions that would enable Medicare beneficiaries to contribute to a health savings account, according to this article on CNBC. Under existing laws, retirees cannot make contributions to this tax-advantaged account, which is funded on a pre-tax basis, offers tax-free growth on savings and tax-exempt withdrawals for qualified expenses. The proposal would benefit older workers who use Medicare as a secondary payer and people who want to sign up for Medicare Advantage with a Medicare medical savings account, says an expert with the Kaiser Family Foundation.
The government can address Social Security’s financial woes by indexing retirement benefits to life expectancy, which has increased in recent decades, according to this opinion piece on MarketWatch. “While life expectancy does not increase the size of the monthly payment, it changes the number of checks that a retiree expects to collect,” this opinion piece explains. “Increased longevity means that workers are more likely attain the age of eligibility, and that retirees will tend to collect over a longer period of time. In other words, the overall retirement protection provided by Social Security expands with life expectancy.”
An expert with Morningstar says that clients who want to make last-minute contributions to an IRA to minimize their tax burden for 2018 should consider their current and future tax rates to determine whether they should direct the funds to a traditional IRA or a Roth IRA. “If you think that your tax rate is high today and you can make a deductible contribution, you are probably better off doing that--taking the tax break now because it's worth more to you than when you pull the money out in retirement and you are in a lower tax bracket,” says the expert. “If the flip side is true, if you think you are in a relatively low tax bracket today and your tax rate is likely to go higher in the future, you are probably better off doing the Roth IRA contribution.”
IRA investors are required to name their account beneficiaries who will inherit their assets when they die, according to this article on Motley Fool. While beneficiaries can take a lump-sum distribution of the entire balance, clients who inherited their spouse’s IRA have the option of rolling over the inherited assets into their own IRA. However, once the inherited assets in their IRA, distributions will be subject to 10% early withdrawal penalty if they withdraw the money before turning 59 1/2. Surviving spouses will not face the penalty if they withdraw the funds directly from the inherited IRA.
