2010 is shaping up to be a pretty important year for your clients financially. Some of these changes are for the better, others not so much. As you speak with your clients, it may be helpful for you to know what changes they face going forward into next year. At the very least, these make for some great discussion topics:
Medicare Advantage Premium Increases: 10 million Medicare Advantage customers will face monthly premium increases of $40 – $70 according to the U.S. Centers for Medicare and Medicaid Services due to changes made by the Obama administration. In addition to higher premiums, providers are also looking to reduce coverage for an array of services to help offset lower reimbursements by the government. With the typical Medicare Advantage customer on a very tight budget, this increase can immensely affect the quality of life.
Social Security Payments to Freeze: The Congressional Budget Office predicts that social security will not see any cost-of-living adjustments until 2012. Since adjustments are tied to consumer price inflation, which is expected to see little to no increase over the next two years, the CBO believes social security payments will remain the same during that time period. The problem here is that the combination of reduced coverage and continually increasing health costs will make it more difficult for most seniors to keep up with their greatest expense.
New Retirement Withdrawal Rules: The passage of the Worker, Retiree, and Employer Recovery Act of 2008 brought with it a waiver for the required minimum distribution age of 70 ½ for retirement account holders and their beneficiaries. This allows retirees to keep money in their accounts to possibly recover some of the losses sustained in 2008. This law is in effect as of this year, and the decision of whether to withdraw or not will affect tax returns due in 2010.
Roth IRA Changes: According to U.S. News, in 2010 income ceilings for Roth conversions will be dropped, allowing anyone to convert as much of their qualifying retirement accounts into Roth IRAs. Since Roth IRAs are funded with post-tax dollars, investment gains are not taxed. With the market having bottomed out (hopefully it can’t get any worse), many financial experts expect investments to recover in 2010. With a Roth IRA, account holders can expect to pay no taxes on any gains made during the recovery. Additionally, conversion taxes can be spread over 2010 and 2011. In summary, 2010 has never been a better year to covert.
Estate Tax Dead?: According to the Wall Street Journal, President Obama plans to block the repeal of the estate tax in 2010, which was passed in 2001, by then-President George W. Bush. Democrats have included a footnote on page 127 of President Obama’s budget that reads “The estate tax is maintained at its 2009 parameters.” So estates will be taxed at up to 45% with an exemption level of $3.5 million for an individual. Democrats reason that only 2% of the richest families pay it, and the money will help fund ongoing government efforts to stimulate the economy. If the estate tax hits zero in 2010, it may never come back, and Democrats don’t want to risk losing that source of tax revenue. The battle continues in Congress with Republicans and a handful of conservative Democrats fighting to keep the law as is. |