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Common Money Misconceptions by Senior Citizens

There are two very important misconceptions to point out about finances, taxes, and our later years: 1. Potential taxes on Social Security and 2. Life insurance policies.

One misconception by seniors about Social Security is many believe that Social Security isn’t taxable. This unfortunately can be a costly misconception.

If a person has other income (wages, self employment income, dividends, interest, real estate income, pension income or other business income) in addition to Social Security, there may be a tax consequence.

Senior African American couple paying bills

An individual filing a single return who has a combined income between $25K and $34K will have up to 50% of their SSA benefits subjected to Federal taxes. If the combined income is more than $34K, up to 85% of the SSA benefits could be taxable.

For joint filers, the ranges are slightly different. From $32K to $44K combined income you could be on the hook for up to 50% of your SSA benefit being taxable and income above $44K, up to 85% of SSA benefits could be taxable.

Seniors should examine their own situations or consult with a tax professional to discover what steps can be taken so that they aren’t hit with a huge tax liability at the end of the year.

The second point is life insurance. I will admit that I am not an insurance specialist, but here is a warning: certain whole life policies that were written pre-1985 may be virtually worthless now. Here is why:

Pre-1985 rates of return were 8% and above.  Many of the premiums that accumulated cash value were calculated based on very high returns.  These type of  returns don’t exist anymore, therefore if you have a whole life policy, it may be best to speak with your insurance agent and ensure that your policy still has worth.  I have seen policies basically “blow up” or become virtually worthless. That is a tough feeling, so make sure you check if you currently have a whole life policy.

I hope this helps.

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About Frederick Towles

Frederick Towles is an entrepreneur, author and professional coach on personal finance, recognizing, seizing and leveraging opportunities of all kinds. Frederick founded The Towles Group Inc. to address issues that relate to small businesses and individuals – accounting, taxation, asset protection, financial compliance, wealth creation, debt management and business management. He also founded Unlimited Expectations Inc. which provides tools for individuals to assist them in the areas of opportunity recognition, leadership and personal finance. Through the tools and services offered by these companies people are positioned to operate their lives and their businesses at optimal capacity.

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