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.
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.