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We’ve all heard the reports. “Social Security is Going Broke.” “Retirement Crisis in America!” These doom and gloomadvisor-steve-stern statements have been around for decades. While the reports may be exaggerated to stroke fear or push for proposals to privatize Social Security. There are real concerns about the viability of the program and financial security for millions of Americans.

More importantly, millions of Americans simply aren’t prepared for retirements that are increasing with life expectancies. In fact, a recent Federal Reserve 2014 Household Survey found that half of all household’s wouldn’t be able to cover a $400 financial emergency.

The changes to Social Security started this year when the “File and Suspend” and “Restricted Application” strategies were officially eliminated ending the ability for couples to “double-dip” their benefits. These changes are nothing compared to a 146 page report released by the Bipartisan Policy Center on June 9, 2016 to improve Social Security and Retirement Savings.

If you are a high income earner, close your eyes, you don’t want to see the following proposals:

1. Increase the Taxable Level of Social Security: Currently only income up to $118,500 is taxed for Social Security. The proposal would increase the earnings level to $195,000.

2. Limit Tax-Deductibility of Mortgage Interest: Many individuals are “home-rich and cash poor.” This recommendation would eliminate tax deductions when home equity decreases such as through a Home Equity Line of Credit (HELOC). This is designed to incentivize increased equity as we age to draw on for retirement income. The move could penalize many high income and middle class consumers who use home equity to refinance to lower rates or put their children through college.

3. Shrink Social Security Benefits for the Wealthy: This proposal would limit the 50% “spousal benefit” for Social Security recipients.

4. Cap Assets Held in Tax-Advantaged Accounts: Who doesn’t remember the magical $100 million Mitt Romney IRA? Hard to forget such a mind blowing figure. In fact the GAO estimates 314 taxpayers have more than $25 million in IRA’s! That is a lot of tax deferred money. The report may result in limits on dollar amounts in tax sheltered accounts such as IRA’s and Roth IRA’s.

5. Close the “Stretch IRA” Loophole: One of the best estate planning tools is to educate your children about the “stretch IRA” to keep wealth in your family for generations. This proposal would eliminate the practice and force liquidation and taxation of an IRA within 5 years.

6. Other Obvious Changes: Tax more Social Security benefits and increase the payroll tax (employer and employee) by 0.5%

The laws are constantly changing. If you haven’t given thought to how these items might impact your financial situation, reaching out to your financial planner can help you feel more confident that you are doing everything you can for your family and your retirement. Steve Stern can be reached at sstern@psgplanning.com

Source: http://www.bloomberg.com/news/articles/2016-06-09/high-earners-are-going-to-hate-these-retirement-proposals

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Steve joined Planning Solutions Group in 2015 and specializes in providing comprehensive financial plans to high-net worth individuals and families. During his career he has realized that his true passion is for building long-term relationships with clients and helping them through the various financial challenges they may face. Steve’s mission is to act as a true advocate for his client’s financial well-being.

Prior to joining Planning Solutions Group, Steve spent four years as a CERTIFIED FINANCIAL PLANNER™ with Keeney Financial Group in Columbia, MD. He has also had the privilege of working for Convergent Wealth Advisors, Legg Mason and NVR, Inc. Steve currently holds the prestigious CFP® designation and has his FINRA series 7 and life and health insurance licenses.

In addition to providing clarity and confidence in all financial matters to his clients, Steve is passionate about giving back to the community. He currently lives in Baltimore City with his new wife and spends his free time rock climbing, travelling, cooking and volunteering with The Associated, a Jewish Philanthropic organization.