New 3.8% Medicare Surtax: NOT Expected To Go Away!

While many are optimistic that Congress will address the “fiscal cliff” items of the Bush tax cuts, the sequester (automatic budget cuts to defense, etc.) and other miscellaneous items such as the Social Security withholding “holiday” and the alternative minimum tax, one new tax will NOT be going away anytime soon.
That tax is the new Medicare 3.8% surtax on investment income for those with Modified Adjusted Gross Income (MAGI) of over $200,000 (single) or $250,000 (couples). MAGI is your Adjusted Gross Income (AGI) plus any net foreign income that you excluded. So, unless you work outside the United States, MAGI=AGI. The surtax is on top of your dividends or capital gains rate, both of which are going up significantly unless Congress can get its act together.
Since taxes will be going up next year unless Congress can avoid the so-called “fiscal cliff,” life insurance proceeds will be there for the survivors no matter what happens with income, interest, dividend and capital gains tax rates.

Life insurance has always been a cost and tax-effective way to protect one’s family from the financial uncertainties of life. The income tax-free death benefit can provide the funds necessary for your loved ones to carry on after they’re gone.

Life insurance can be viewed as a self-completion program when there is no longer time to accumulate funds for the many needs of the family – retirement, college funding,
taxes, debt reduction, etc. One other factor in a family’s ability to provide for future needs is how effective they’ve been at minimizing taxes over the years so their assets
grow efficiently and to maximum value.

Cash value life insurance has a number of tax advantages, including income tax-free death benefit, tax deferred growth, tax-free access to policy values through policy
loans or withdrawals and other living benefits.
While life insurance is bought for the death benefit it provides to the family, we certainly don’t want to overlook the other tax advantages that it enjoys.

It’s an uncertain world out there. Plan now to help mitigate the many risks you and your family face in the new economic environment.

>The Rule of 100.

>Planning for your future income needs can get overwhelming to the point where most Americans tend to put off the process making it harder to meet their goals. The trend of putting off planning can cause our investments to stay in higher risk/higher gain vehicles for a longer period of time than necessary, creating a risky, stress filled retirement life or even a delay in the retirement process.

A simple plan is to follow the Rule of 100. This Concept creates a consistent process of review and transfer of your money.

Here is how it works. Take your age today and subtract it from 100. That number is the percentage of your investments that should be in the market. If your 401k is setup with 100% of your money in Growth and Income Funds, it’s time to make sure that you have money in a protected growth strategy. A $30,000 401k Balance for a 30 year old should be no more than 70% of the total holdings for the future. This amount is above and beyond the Emergency Fund you have established for Roof, Auto and Major medical expenses that may come up in the future.

Unfortunately, Americans are retiring today with 100% of their money still in the market where it can erode with a one day downturn in the Dow Jones industrial average. How does your retirement plan look? Are you in line with the rule of 100? A second opinion will cost you nothing but time but the benefits can pay dividends for a lifetime.