Trump's Education Secretary Tries Again to Cut Debt Relief for Students Who Were Misled

"Thousands of students who took out federal loans to attend schools that lured them with fraudulent claims will still have to repay a portion of their debts, the Education Department said Tuesday — a new attempt to water down a loan-forgiveness program that the department’s leader has long deplored."

Stacey Cowley, writing for The New York Times explains: 
"The change creates a complicated sliding scale on which defrauded students’ relief is calculated using group earnings data. Debts will be fully forgiven only if students in a particular program earned far less than those from similar programs at other schools." 


Education Secretary Betsy "DeVos sought in 2017 to reduce the relief offered through the rule known as “borrower defense to repayment,” which allows the former students of schools that broke laws to seek forgiveness of their federal student loans. A federal court blocked that effort, saying the department’s method for determining how much relief to grant applicants illegally misused individual income data obtained from another federal agency."

"Ms. DeVos’s actions are 'a slap in the face of students across the country,' a group of students who attended now-closed for-profit schools said in a letter sent to the secretary on Tuesday."

Check Out the New W-4 Tax Withholding Form

If you are starting a new job, work multiple jobs, are self-employed, or if you want to adjust the amount of income tax withheld from your paycheck, the IRS offers a new version of Form W-4, which instructs employers how much tax to withhold.

"The redesign reflects changes to the federal tax code from the Tax Cuts and Jobs Act, which took effect last year." according to Ann Carrns, writing for The New York Times.

"Accurate paycheck withholding is important because if too little money is deducted, you may face an unwelcome bill — and possibly a penalty — at tax time. Ideally, tax experts say, the amount withheld should roughly match the amount of tax owed."

"If too much money is deducted, you may get a fat tax refund. Some people prefer large refunds as a sort of forced savings, but a big refund means you gave the government a no-interest loan."
"the form allows workers to use the I.R.S.’s online tax withholding estimator tool or to complete a printed work sheet to determine how much to withhold"

Required Minimum Distributions (RMDs) from retirement accounts

• After you turn 70½, you must prepare for required minimum distributions from your individual retirement accounts and 401(k) plans.
• If you don’t take your so-called RMD in time, you’ll face a penalty of 50% of what you were supposed to withdraw.
• Got an RMD for 2019? You have less than four weeks to get it together.

"Individuals who turned 70½ this year — and those who are older — are responsible for taking required minimum distributions from their individual retirement accounts and from each of their 401(k) plans."
"Generally, you have until Dec. 31 to take your so-called RMD."
"People who just turned 70½ in 2019 may wait until April 1, 2020 to take their first distribution. However, they will still need to take a 2020 distribution by the end of that year."

Details from Darla Mercado at CNBC at: https://www.cnbc.com/2019/12/10/if-you-miss-this-year-end-retirement-deadline-youll-face-a-50percent-tax.html

Retirement plan limits for 2019-2020

 401(k) contributions
The annual contribution limit for employees who participate in 401(k), 403(b), most 457 plans and the Thrift Savings Plan used by federal government employees increased in 2019 to $19,000 (and those limits will be going up another $500 in 2020). If you’re 50 or older, you also can take advantage of a catch-up provision of $6,000 (a figure that is also rising by $500 in 2020). That means all together you could put away $25,000 in your employer-sponsored plan in 2019 — and that total rises to $26,000 in 2020. And in case you were wondering, your employer’s matching contribution, if there is one, doesn’t count toward your limit

IRAs
The contribution limits for traditional and Roth IRAs went up in 2019 — to $6,000, or $7,000 for those who are 50 and older. So if you’re a 50-plus individual focused on growing your savings account, you could put away as much as $32,000 between your 401(k) and your Roth in 2019.

Contribution limits for Roth IRAs and traditional IRAs will remain the same in 2020.

Thanks to:  Dina Siracusa, Investment Adviser Representative | Provident Wealth Advisors
Source: https://www.kiplinger.com/article/retirement/T047-C032-S014-401-k-and-ira-advice-especially-for-women.html

Understanding Medicare and Social Security

A great resource for understanding the basics of Social Security and Medicare

Writing for USNWR, Rachel Hartman explains:

How Social Security and Medicare Work Together

 "Social Security and Medicare are social safety programs that Americans pay into during their working years through taxes. Both are designed to assist older Americans and distribute benefits to the disabled and their families. Social Security provides financial support, and Medicare is a health insurance program that helps cover doctor visits, hospital stays and other medical treatments.

While the programs are separate, Social Security and Medicare are intertwined in several ways. Here, we look at the connections between the two programs as well as what to expect when applying for benefits."

Get the details at: 

https://money.usnews.com/money/retirement/social-security/articles/how-social-security-and-medicare-work-together

How did you pick the funds in your retirement account? ABC...

A paper published in the Financial Review concluded that when selecting funds within their 401(k) plans, many people choose the options at or near the top of alphabetical lists. "It's absolutely amazing how powerful this effect is and how much it is really distorting what's being invested in," said paper co-author Jesse Itzkowitz. As reported in The Wall Street Journal.

Review your mutual fund choices and rebalance your portfolio before the end of the year! 

Managing Sequence of Returns Risk in Retirement & avoid scams with income annuities

What IS "sequence of returns risk"?
Sequence risk, or sequence of returns risk, is the risk that the stock market crashes early in your retirement. Long-term average returns matter less than when those returns occur. If your portfolio drops dramatically in value early in retirement you end up selling low without the ability to gain by buying low. You also have to sell more of your stocks to generate the same amount of income, which means you’re selling off your nest egg shares at a faster rate. It's very difficult to recover from a major investment crash early in retirement. As persons who retired in 2008.
https://www.moneycrashers.com/sequence-returns-risk-investments-retirement/

Sequence-of-returns risk can have a severe impact on an otherwise sound portfolio, writes Phil Caminiti of New York Life Insurance. He suggests retirement savers look into using income annuities as they can provide guaranteed lifetime income regardless of market fluctuations and reduce the amount retirees may need to withdraw early on to cover expenses.
"Income annuities are a useful hedge against sequence-of-returns risk for two reasons: 1) They provide a guaranteed source of lifetime income that is not correlated to market ups and downs or interest rate fluctuations, and 2) annuity income lowers the withdrawals that retirees might need to cover expenses. This is particularly good news when the market performs poorly in the early years of retirement by helping retirees avoid selling at the bottom."
https://www.investmentnews.com/article/20191206/BLOG09/191209955/timing-matters-when-it-comes-to-managing-sequence-of-returns-risk

Another major advantage of an income annuity is that scammers can't get access to your nest egg. There have been too many examples of super-sophisticated scams targeting older persons resulting in them losing their entire nest egg. The Wall Street Journal recently reported on scammers who very convincingly impersonate IRS and FBI officials threatening the targeted person with jail and high fines if they don't cooperate and transfer their investments to accounts where the FBI can supposedly protect their money. These super sophisticated scams have exploded in the past year.

Don't get sucked in to one of these scams and don't let your parents or grandparents become victims.