Enhance Retirement Savings with a Health Savings Account

I am interested in contributing to a health savings account to boost my retirement savings and would like a better understanding of how they work. What can you tell me?

A health savings account (HSA) is a financial tool that can help you accumulate a tax-free fund for medical expenses now and after you retire. To qualify, you must be enrolled in a high-deductible health insurance plan. Here is an overview of how they work and how you can open one.

HSA Rules

HSAs have become very popular over the past few years as the cost of health care continues to escalate and high-deductible health plans become more prevalent in America.

The great benefit of an HSA is its triple tax benefits. HSA contributions are deducted pre-tax from your paycheck, which lowers taxable income. The HSA account allows for tax-free growth of funds and if utilized for qualified medical expenses, withdrawals remain tax-free. Additionally, the HSA stays with you even if you switch employers.

To be eligible, you must have a health insurance policy with a deductible of at least $1,500 for an individual or $3,000 for a family in 2023. In 2024, the deductible threshold increases to $1,600 for an individual or $3,200 for a family.

This year, you can contribute up to $3,850 as an individual with high deductible health insurance coverage, or up to $7,750 for family coverage. In 2024, you can contribute up to $4,150 for individual coverage or up to $8,300 for family coverage. Individuals age 55 and older can save an additional $1,000 each year, which remains applicable in 2024. However, contributions are not permitted once Medicare enrollment is completed.

The money can be used for out-of-pocket medical expenses, including deductibles, co-payments, Medicare premiums, prescription drugs, vision and dental care and more. These expenses can be incurred now or during retirement. See the most recent Internal Revenue Service (IRS) Publication 502, Medical and Dental Expenses, for a complete list (IRS.gov/forms-pubs/about-publication-502). The HSA account can be used for yourself, your spouse and your tax dependents.

Unlike a flexible spending account (FSA), an HSA does not require you to use the money by the end of the year. Rather, HSA funds roll over year to year and continue to grow tax-free for later use.

You will receive a greater tax benefit if you use alternative funds for current medical expense, allowing the HSA money to continue growing for the long term. Be sure to hold on to your receipts for medical expenses after you open your HSA, even if you pay those bills with other funds, so you can claim the expenses later. There is no time limit for withdrawing the money tax-free for eligible medical expenses you incurred any time after you opened the account as long as you were covered by an eligible high deductible health plan.

If you use your HSA funds for non-medical expenses, you will be required to pay taxes on the withdrawal, plus a 20% penalty. The penalty is waived for those age 65 and older, but you still pay ordinary income tax on withdrawals not used for eligible expenses.

How to Open an HSA

You should first check if your employer offers an HSA and if they make contributions to it. If not, you can open an HSA through many banks, brokerage firms and other financial institutions, as long as you have a qualified high-deductible health insurance policy.

If you plan to let your funds grow for the future, look for an HSA administrator that offers a portfolio of mutual funds for long-term investing with low fees. After setting up your HSA plan, adding money should be straightforward. Most plans let you do online transfers from your bank, send checks directly or set up a payroll deduction if offered by your employer. To access your HSA funds, many plans provide a debit card and most allow for reimbursement.

Savvy Living is written by Jim Miller, a regular contributor to the NBC Today Show and author of "The Savvy Living" book. Any links in this article are offered as a service and there is no endorsement of any product. These articles are offered as a helpful and informative service to our friends and may not always reflect this organization's official position on some topics. Jim invites you to send your senior questions to: Savvy Living, P.O. Box 5443, Norman, OK 73070.


Published December 1, 2023

How an Incentive Trust Can Influence Your Heirs

What can you tell me about creating an incentive trust? I have concerns about my heir’s financial management skills and would like them to meet certain requirements in order to receive distributions from my estate.

If you want to influence your heirs after you are gone, an incentive trust is an option to consider. But be careful how you construct it because it can cause unintended, unfair consequences. Here is how it work and tips to help you create one.

Incentive Trusts Basics

An incentive trust is an estate-planning tool designed to help encourage your heirs in a direction you desire when you are no longer around.

With an incentive trust, some or all of your assets are passed to the trust when you pass away rather than directly to your heirs. Your trustee is empowered to distribute funds from the trust only after your beneficiaries meet certain conditions you have specified in the trust.

For example, an incentive trust might encourage a beneficiary to graduate from college, enter a particular profession, get married or even have children. They could also reward beneficiaries who do charitable work or supplement the incomes of those who choose low paying, yet meaningful careers like teaching or social work. On the other hand, it could penalize beneficiaries by cutting off or decreasing distributions or placing restrictions on heirs who do not work.

These types of trusts can also have drawbacks. A poorly constructed incentive trust has a high risk of unintended consequences. For example, if your trust provides a financial incentive for your children to be employed full-time, but one of them gets sick or seriously injured in a car accident and cannot work, they would be unfairly punished unfairly.

Incentive trusts can also be costly to create. Prices vary depending on the state you live in and how sophisticated the trust needs to be. The cost of hiring an attorney to draft the trust can range anywhere from $1,500 to $5,000 or more.

There are also legal limits on what you can do with an incentive trust. While state laws vary, incentive trusts that encourage a beneficiary to join or leave a particular religion, leave a spouse or not marry at all, can be challenged in court with a higher likelihood of the court finding an issue with the provision.

How to Create a Trust

To create a solid incentive trust that accomplishes what you envision, you need to hire an estate-planning attorney who will include precise instructions that clearly spell out your wishes. You will also want to include language granting your trustee the right to use his or her discretion and that the trustee’s decisions should be final and binding.

This allows your trustee to make common sense rulings, which will reduce or eliminate the chances of unintended and unfair consequences. It also makes it very difficult for beneficiaries to successfully challenge the trust or trustee in court. When a trust grants final decision-making authority to its trustee, it becomes difficult for beneficiaries to successfully argue that the trustee is not correctly implementing the trust’s terms.

The key is to select a trustee who is savvy enough to interpret your intent and possesses resilience enough to assert the trust terms when dealing with beneficiaries. You should also select a successor trustee if your first choice can no longer serve. Fees paid to a trustee vary widely depending on the state’s fee schedules, the size and complexity of the trust and who serves as trustee.

Creating an effective incentive trust that is representative of your wishes and provides flexibility for unforeseen situations can involve some complexity. To find an experienced attorney who can assist you in drafting an incentive trust, explore online resources to locate a professional in your area.

Savvy Living is written by Jim Miller, a regular contributor to the NBC Today Show and author of "The Savvy Living" book. Any links in this article are offered as a service and there is no endorsement of any product. These articles are offered as a helpful and informative service to our friends and may not always reflect this organization's official position on some topics. Jim invites you to send your senior questions to: Savvy Living, P.O. Box 5443, Norman, OK 73070.


Published November 24, 2023

IRS Encourages IRA Gifts To Charity

In IR-2023-215, the Internal Revenue Service (IRS) reminded traditional IRA owners who are over 70½ they may make a charitable gift before the end of this year. The IRS refers to an IRA charitable rollover gift as a qualified charitable distribution (QCD). An additional benefit for IRA owners who are age 73 or older is that a QCD may fulfill part or all of the required minimum distribution (RMD) for this year.

It is helpful for traditional IRA owners to understand how to do a QCD, what is required to report a QCD on a tax return and the required information of acknowledgment from the nonprofit.

1. How to Set Up a QCD — A traditional IRA owner may contact his or her IRA trustee to start the process for a QCD. While distributions from a traditional IRA are normally taxable, the QCD payouts will be tax-free as long as they are paid directly to a qualified nonprofit. The QCD is made through a check payable to the charity. An electronic payment or a check made out to the IRA owner does not qualify as a QCD. The owner must be age 70½ or older and the 2023 limit is $100,000. If spouses are both over age 70½ and have separate IRA accounts, then the $100,000 per person limit may allow a couple to distribute up to $200,000 per year to charity. Because the QCDs are not taxable, there will be no charitable deduction.

2. How to Report Your QCD — Your QCD must be reported on your 2023 federal income tax return. You can expect to receive an IRS Form 1099-R from your IRA trustee, with the traditional IRA distribution in Box 1. You must report the IRA distribution on Line 4 of IRS Form 1040. You will enter the total amount of the IRA distribution on line 4a. If the full amount is a QCD, you then enter zero on line 4b. If part of the distribution is a QCD, the taxable portion is normally entered on line 4b. You must enter "QCD" next to line 4. If you have entered zero on line 4b, the entire QCD will not be taxable.

3. Nonprofit’s QCD Acknowledgment — Your QCD is not deductible as a charitable contribution. However, you are required to obtain a written QCD acknowledgment from the nonprofit prior to filing your return. This acknowledgment should state the date and amount of the QCD and indicate that the donor has received "no goods or services in exchange for the gift." You should retain the acknowledgment with your other 2023 tax records.

Editor's Note: Many individuals will fulfill part or all of their RMD this year through a gift to charity from a traditional IRA. It is best to start the gift process no later than early December. Some IRA custodians may take time to process the transfer. If a donor has the right to make distributions from his or her traditional IRA through a checkbook, it will be important to send the check directly to the charity. Please allow sufficient time for the charity to deposit the check and for the financial institution to process the check. This process must be completed by December 31, 2023.


Published November 17, 2023

Financial Assistance Programs for Everyday Needs

What types of programs are available to help individuals struggling with everyday bills?

There are dozens of different financial assistance programs and government benefits that may be able to help with everyday expenses. To locate these types of programs, visit BenefitsCheckUp.org, a site created by the National Council on Aging that lists nearly 2,000 programs across the country to connect individuals with benefits programs. This is a free, confidential online screening tool designed for older adults and people with disabilities. It will help find federal, state and local benefits programs that can assist with paying for food, utilities, health care, medications, housing and many other needs.

To identify benefits, begin by entering in your ZIP code and choose the types of benefits programs you are interested in. Certain eligibility questions regarding personal and financial information may be required. Once completed, you will get a list of programs to choose from, followed by a personalized report that explains each program, and tells you where you can get help or how to apply.

If you need assistance or do not have internet access, you can always speak with a benefits support specialist by calling 800-794-6559. You can also get help in-person at any of the Benefit Enrollment Centers located across 41 states. See NCOA.org/article/meet-our-benefits-enrollment-centers to search for a center in your area.

Types of Benefits

Depending on your income level, location and circumstance, here are a few of the many different benefits you may be eligible for:

Nutrition assistance: Programs like the Supplemental Nutrition Assistance Program (SNAP) can help pay for food at the grocery store. The average SNAP benefit for individuals age 60 and older is around $105 per month. Other nutrition programs that may be available include the Senior Farmers Market Nutrition Program and the Commodity Supplemental Food Program.

Utility assistance: The Low-Income Home Energy Assistance Program (LIHEAP) provides assistance in lowering home heating and cooling costs. For broadband assistance, the Affordable Connectivity Program provides a monthly subsidy that can be applied toward home internet costs.

Health care and medicine: Medicare Savings Programs and Medicaid can help or completely pay for out-of-pocket health care costs. For assistance with medications, there is a low-income subsidy program called ‘Extra Help’ that helps pay premiums, deductibles and co-payments on Medicare (Part D) prescription drug coverage. You can also search for prescription drug help through patient assistance programs or your state pharmaceutical assistance program at Medicare.gov.

Supplemental Security Income (SSI): Administered by the Social Security Administration, Supplemental Security Income (SSI) provides monthly payments to low-income individuals age 65 and older as well as to those who are blind and disabled. In 2023, SSI pays up to $914 per month for a single person and up to $1,371 for couples. Visit ssa.gov/ssi to determine eligibility and to apply.

In addition to these benefits, there are dozens of other programs BenefitsCheckUp.org can help identify such as housing assistance, property tax reduction, home weatherization assistance, tax relief, veteran’s benefits, transportation, caregiving support, free legal assistance, disability services, job training and more.

Savvy Living is written by Jim Miller, a regular contributor to the NBC Today Show and author of "The Savvy Living" book. Any links in this article are offered as a service and there is no endorsement of any product. These articles are offered as a helpful and informative service to our friends and may not always reflect this organization's official position on some topics. Jim invites you to send your senior questions to: Savvy Living, P.O. Box 5443, Norman, OK 73070.


Published November 17, 2023

IRS Announces Paperless Processing for 2024


On November 7, 2023, the Internal Revenue Service (IRS) announced there will be major improvements for the 2024 filing season. Treasury Secretary Janet Yellen and IRS Commissioner Danny Werfel were pleased to announce the success of the Paperless Processing Initiative.

The IRS reached the initial Paperless Processing Initiative goal three months ahead of schedule. Taxpayers can now use the Document Upload Tool to respond to all notices. The IRS explained it has received 35,000 digital responses to notices with the updated tool.

A second goal is to enable at least 94% of individual taxpayers to respond to the IRS through the website instead of sending mail. The IRS website has various forms and information, including help on preventing identity theft and assistance in qualifying for credits and deductions. This new service will allow 125 million paper documents per year to be converted to digital form.

By the start of the filing season in 2024, the IRS promises to allow e-filing of at least 20 additional tax forms. This will include various business forms, such as IRS Forms 940 and 941.

There also will be important new updates to the "Where's My Refund?" tool. This has been the most popular customer service tool on IRS.gov. Last year, over 54 million taxpayers produced 550 million hits on this tool.

The current tool provides a very basic message such as, "Your tax return is still being processed. A refund date will be provided when available. For more information about processing delays, please see our Refund Frequently Asked Questions."

The updated version will provide much more explanation. For example, it may state, "To protect you from identity theft, your tax return is currently being reviewed. To help us process your return more quickly, verify your identity and tax return information. If you recently received a letter from us, follow the instructions on the letter. Please have your tax return (Form 1040 series) available and read the website or letter before starting the verification process. If you already reviewed your identity and tax return information, you may check the status of your refund in two to three weeks."

The IRS also promised other improvements. It set a target for improved phone service to reach an 85% Level of Service next year. The average holding time target is five minutes or less. Over 95% of eligible taxpayers will be able to request a call back from the IRS. These improvements are designed to continue "to promote trust and satisfaction when taxpayers call the agency."

The IRS is continuing to make progress on Direct File. The pilot program for 2024 will be available in both English and Spanish. It is expected to be used by both low- and moderate-income taxpayers who take the standard deduction. The individuals may have W-2 wages, Social Security or Railroad Retirement benefits or interest income of less than $1,500. They will also be able to deduct educator expenses and student loan interest. More complex tax returns will need to wait for a future improved Direct File program.

The Direct File pilot will not include all state returns. However, there will be state returns for some taxpayers from Arizona, California, Massachusetts and New York. In addition, taxpayers in the nine states with no income tax will be able to use Direct File.

The IRS plan is to phase in Direct File over a number of years. This phased rollout enables the IRS to make certain that the taxpayers who use the program will receive quality service.


Published November 10, 2023

Understanding Medicare Advantage Ads

What is the best way to choose a Medicare Advantage plan? I am considering switching from original Medicare to a Medicare Advantage plan. Many of the advertisements I see seem too good to be true because they offer extra benefits with no monthly premiums.

Exercise caution when encountering Medicare Advantage advertisements on TV, radio, social media or direct mail. While many of these advertisements may offer free vision, hearing, dental and other benefits with zero monthly premiums, they may offer very limited coverage.

Advantage basics

Medicare Advantage or MA plans (also known as Medicare Part C) are government-approved health plans sold by private insurance companies that you can choose instead of original Medicare. Most Medicare Advantage plans are managed-care policies such as HMOs or PPOs that require you to get your care within a network of doctors in a geographic area. The open enrollment period for those switching from original Medicare to a Medicare Advantage Plan is from October 15 through December 7.

Medicare Advantage plans have exploded in popularity in recent years as insurers have increased their advertisements that promote low-cost options with many extra benefits. The federal government has deemed many claims in MA advertisements as fraudulent and misleading. Some advertisements falsely imply that the Centers for Medicare and Medicaid Services endorse or prefer a specific plan while others promise more cost savings than you will receive. If you choose the wrong plan, your doctor may not be a member of that plan's network or you may end up paying out-of-pocket for medically necessary care.

In September, the U.S. Department of Health and Human Services finalized new marketing requirements to protect consumers and improve the quality of advertisements. However, you should proceed cautiously when choosing a plan. Here are some tips to help you make an informed decision.

Cover your needs: When evaluating MA plans, make sure the one you are considering covers your preferred doctors and health care facilities. You should also confirm that your prescription medications are on the insurer's drug plan formulary.

To help you compare plans, contact your health providers and find out which MA plans they accept and which ones they recommend. Then, go to the Medicare Plan Finder tool at Medicare.gov/plan-compare to compare plans in your area.

Understand the details: Some MA plans promote no monthly premiums, but the reality is that you are still responsible for your original Medicare costs including your Part B premium, deductibles and copays for covered services. Moreover, you may have to pay out-of-pocket if you see an out-of-network doctor. Also, HMO plans generally do not cover out-of-network non-emergency services, so an individual may be responsible for full costs. On the other hand, A PPO plan allows people to go out of the network, but they generally must pay more to do so.

Do some research: Many MA plans tout free vision, hearing and dental benefits that are not covered by traditional Medicare, but these benefits are often limited. For example, a plan that offers free dental coverage may cover only cleanings and x-rays. Extensive procedures such as root canals or implants may not be covered, or the plan may limit the dollar amount it pays. Be sure to investigate the coverage details to avoid unexpected charges later.

Get help: For additional help, contact your local State Health Insurance Assistance Program (SHIP) at ShipHelp.org or call 877-839-2675. These programs provide unbiased one-on-one Medicare counseling and assistance.

If you believe you made a mistake in your plan choice due to misleading or inaccurate marketing claims, call a Medicare customer service representative at 800-633-4227 to explain your situation and get assistance.

Savvy Living is written by Jim Miller, a regular contributor to the NBC Today Show and author of "The Savvy Living" book. Any links in this article are offered as a service and there is no endorsement of any product. These articles are offered as a helpful and informative service to our friends and may not always reflect this organization's official position on some topics. Jim invites you to send your senior questions to: Savvy Living, P.O. Box 5443, Norman, OK 73070.


Published November 10, 2023

Simplified Universal Television Remotes

I am not comfortable with the complicated functionalities of my new television remote control. Can you offer suggestions for simple, universal television remotes?

Most modern television remotes come with dozens of unnecessary buttons that can be confusing for anyone to operate. Fortunately, there are several universal TV remotes available, including a few that are specifically designed for someone with vision, memory or confusion issues, as well as those who are not technologically savvy. These remotes have button options that make them easier to see and use. Here are some top choices to consider.

Button-Friendly Remotes

Some of the most popular simplified TV remotes on the market today are infrared (IR) remotes. These remotes are intended for those who use traditional cable/satellite boxes or their TV's internal tuner. They are not designed for people who use streaming media devices and will not work with devices that are controlled via Bluetooth or radio frequency.

If you are not sure how your TV is controlled, point the remote at the ground in the opposite direction from the device and press any button. If the remote still executes the command, then it is using Bluetooth or radio frequency signals.

A simple IR remote works with all major TVs including cable, satellite and digital TV receiver boxes. Designs that are lightweight or tapered make it easy to hold. For simplicity purposes, look for remotes with large color-coded tactile buttons to control the power, mute, volume up/down, and channel up/down. Some remotes also have large easy-to-see buttons that light up when pressed, which is helpful when someone is watching TV in a dark setting. Many of these remotes also come with a removable handy wrist strap to prevent misplacing the remote.

Another convenient option some universal remotes include is the "favorite channel" feature that will let you program your favorite channels. This gives the ability to directly punch in a desired channel while keeping the remote simple and uncluttered. Some remotes can also be locked to prevent accidental reprogramming. These types of remotes are available through online retail websites with prices ranging between $14 to $40.

Multi-Device Remote

If the big-button remotes are too basic for your entertainment system, there are simplified universal remotes that offer the ability to control multiple devices while still having an accessible layout.

Although these remotes have more functions, it is still important to look for one with an ergonomic design and large buttons that will let you control multiple audio/video components such as TV, cable/satellite receiver, Blu-ray/DVD player, streaming media players and sound bars. In addition to power, volume, channel, mute buttons and number pad. Many of these remotes also offer a previous channel, sleep timer and input option for convenience.

Finding the best TV remote can require some trial-and-error. But, once you find one that works, it can have a positive impact in keeping you connected.

Savvy Living is written by Jim Miller, a regular contributor to the NBC Today Show and author of "The Savvy Living" book. Any links in this article are offered as a service and there is no endorsement of any product. These articles are offered as a helpful and informative service to our friends and may not always reflect this organization's official position on some topics. Jim invites you to send your senior questions to: Savvy Living, P.O. Box 5443, Norman, OK 73070.

End-of-Year Gift Planning in 2023

November is an excellent month to consider plans for charitable gifts. These gifts could include an IRA charitable rollover, a gift of cash or a gift of appreciated stock or land.

1. IRA Charitable Rollover — The IRS refers to the IRA charitable rollover as a qualified charitable distribution (QCD). An individual age 70½ or older is permitted to make a transfer directly from his or her IRA custodian to a qualified nonprofit. The transfer is not included in taxable income. If the IRA owner is over age 73, the distribution may fulfill part or all of the required minimum distribution (RMD).

Because many individuals have invested their IRAs in stocks, bonds or other securities, it may be necessary to exchange the IRA stock or bond accounts for a money market fund prior to the distribution. Most custodians require a QCD to be paid from a money market account or similar fund.

There are some limits for the IRA rollover. The IRA owner must be at least age 70½ and the maximum transfer in 2023 is $100,000 ($105,000 in 2024). The transfer must be to a qualified exempt nonprofit and may be for a designated purpose or field of interest fund. However, it may not be to a donor advised fund or supporting organization. In addition, it may not be for a nonprofit dinner or other event that involves a partial benefit to the donor. The entire QCD must be for a qualified charitable purpose.

2. Gifts of Cash — Individuals who itemize deductions may deduct gifts of cash up to 60% of their contribution base, which is usually adjusted gross income (AGI). A couple with $100,000 in income may give and deduct up to $60,000 this year. While the 60% of AGI limit is substantial, some generous individuals give more than this and may carry forward and deduct the excess gift amounts during the next five years.

3. Gifts of Stock — With the increased value of many technology stocks in 2023, many donors find that a gift of appreciated stock is attractive. A gift of appreciated stock provides two benefits. A charitable contribution deduction is based on the fair market value of the stock and there is a bypass tax on the capital gain. If a donor purchased stock five years ago for $10,000 and it is now worth $30,000, the donor could pay capital gains tax on $20,000 if the stock is sold. By giving the stock to a nonprofit, a donor receives a deduction for the $30,000 in value and bypasses the tax on the $20,000 of potential gain.

4. Gifts of Land — With substantial increases in value for real property, many donors will find that a gift of appreciated property is attractive. A gift of appreciated land provides two benefits for the donor. First, the donor may receive a charitable contribution deduction for the fair market value of the land. Second, the donor can bypass tax on the capital gain. If the donor purchased development land 10 years ago for $50,000 and it is now worth $250,000, the donor would pay capital gains tax on $200,000 if he or she sold the property. However, by giving the land to a nonprofit, the donor may receive a deduction for the $250,000 in value and bypass the tax on the $200,000 of potential gain. Because the donor is receiving both the deduction and capital gain bypass benefits, this type of charitable deduction is permitted to 30% of adjusted gross income (AGI). If the gift value is in excess of this limit, it may be carried forward for five additional years. For example, Mary Smith has adjusted gross income of $100,000 this year and makes a gift of appreciated land with fair market value of $80,000. She is able to deduct $30,000 this year, carry forward $50,000 and deduct that amount over the following five years.

Protect Yourself From Fake Charities

On October 24, 2023, the Internal Revenue Service (IRS) issued a warning that donors should be aware of criminals who falsely pose as legitimate charities. These fake charities may scam good-hearted donors into making gifts that are for the purpose of helping those in need. However, these contributions to fake charities are not deductible on the donor’s tax returns.

IRS Commissioner Danny Werfel noted, "We all want to help innocent victims and their families. Knowing that we are trying to aid those who are suffering, criminals crawl out of the woodwork to prey on those most vulnerable - people who simply want to help. Especially during these challenging times, do not feel pressured to immediately give to a charity you have never heard of. Check out the charity first and confirm it is authentic."

The IRS helps taxpayers on IRS.gov by offering a way to gather information on legitimate charities. There is a helpful Tax-Exempt Organization Search (TEOS) tool. It shows the existence of the charity, notes that it is eligible to receive tax-deductible contributions and lists the tax-exempt status and filings. Not all eligible charities will appear in this tool, some religious organizations may not be searchable.

The Federal Bureau of Investigation also has resources on "Charity and Disaster Fraud." This information also gives guidelines on protecting yourself.

Whenever there is an international crisis, such as a disaster or conflict, criminals take advantage of the generous spirit of Americans to create a bogus charity. Not only will they seek gifts, but they also ask for personal information that may assist them in identity theft.

These promoters will contact individuals using email or calls. They now are sufficiently sophisticated to "spoof" their caller ID to make it look like they represent a real charity. Many of the scammers target individuals who are seniors or have limited English proficiency.

You should be aware of strategies used by the fraudsters and scammers. They frequently will use names similar to legitimate charities. If an individual is uncertain about a call or email, he or she should ask the fundraiser for the exact charity name, website and mailing address. This information can be used to confirm that this is a legitimate nonprofit.

You should be cautious if you are asked for an immediate payment. Legitimate charities are willing to be patient and wait until the donor is prepared to make the gift. Scammers also will sometimes demand a large donation through a gift card or an immediate transfer by wire from a bank account.

Victims who make gifts to fraudulent charities do not qualify for an itemized charitable deduction. Only gifts to qualified tax-exempt nonprofits are qualified.

Editor's Note: Americans are among the most generous people on the planet. Their desire to help may make them vulnerable to scammers. It is admirable to make generous gifts to charity, but donors need to be certain that those gifts go to legitimate organizations.

IRAs - Regular and Roth

While Social Security will provide approximately 40% of the average person's retirement income, an Individual Retirement Account (IRA) is an essential addition for a successful retirement. Your IRA has two main benefits—contributions to a regular IRA are from pre-tax income and there is tax-free growth. There is another version of an IRA called a Roth IRA, which is funded with after-tax income.

Linda is in her middle working years and anticipates receiving Social Security when she retires. But she has several questions about whether she should also start funding an IRA.

• How should I fund my IRA?
• Is it a good idea to do an IRA rollover?
• At what age should I start taking IRA distributions?
• Should I take the minimum required distribution or a larger amount?

Funding the IRA

If you are not actively participating in another type of qualified retirement plan and are within an adjusted gross income limit, you may qualify to transfer a substantial sum each year into an IRA. The IRA contribution amount is $6,500 this year. If you are over age 50, you may also make an additional $1,000 "catch-up" contribution. The maximum IRA contribution amounts are indexed for inflation in increments of $500. In future years, the contribution amount will increase.

Because Linda is over age 50, she is able to contribute $6,500 and her catch-up amount of $1,000, for a total of $7,500 to her IRA this year.

Linda considers the options to create a regular IRA or a Roth IRA. Because she wants to receive the income tax deduction, she transfers the funds into a regular IRA and deducts the $7,500 on her federal tax returns.

IRA Rollovers

The majority of larger IRAs are funded through rollovers from retirement plans through your employer. If you have a qualified plan through your employment, upon separation from service or reaching a specific age, such as 70, you will usually have an option to rollover to a self-directed IRA.

Normally, your qualified plan through a business has been funded with pretax income. The IRA account also benefits from tax free growth. Therefore, the rollover will be from the other qualified plan into a regular IRA. Your IRA will continue to grow tax free, but future distributions to you will be taxable.

IRAs may be rolled over to a new custodian. The preferred method is to have a custodian-to-custodian transfer. If the funds are transferred directly from one IRA custodian to the new custodian, there is no tax.

While it is permissible for your custodian to transfer funds to you and then for you to make the rollover, your IRA custodian will withhold 20%. Because of the 20% withholding requirement, virtually all IRA rollovers are completed with the custodian-to-custodian method.

An IRA to Roth IRA rollover may also be permissible for you. Generally speaking, people with any adjusted gross income are permitted to transfer a regular IRA to a Roth IRA. The value of the IRA will be included in your taxable income, so you may owe a substantial income tax for the conversion.

The primary benefit of the conversion to the Roth is that a Roth IRA does not have a mandatory distribution requirement at age 73. The funds may be permitted to grow tax free and, at the discretion of the owner, may be withdrawn tax free during retirement years. If the owner of a Roth IRA does not make withdrawals, then the Roth may be transferred to children, who may make tax-free withdrawals over a term of ten years.

IRA Distributions

For a traditional IRA, there are specific rules on both contributions and withdrawals. Withdrawals for distributions are generally not taken before age 59½. With limited exceptions—such as uniform distributions over a lifetime, disability, separation from employment after age 55, or other exceptions—there is a 10% excise tax in addition to the regular ordinary income tax on withdrawals before age 59½. Therefore, very few individuals take early withdrawals before age 59½.

Between ages 59½ and 73, there is an optional period for withdrawals. The withdrawals are not required, but you may withdraw any amount. Of course, for a traditional IRA the amount withdrawn is taxable to you and no longer grows tax free in the fund. Therefore, you may not want to take withdrawals unless you actually need the funds for living expenses.

After you reach age 73, there are required minimum distributions (RMDs). The distributions start at approximately 3.8%at age 73 but increase with age each year. The distribution is calculated using your balance on December 31 multiplied by the appropriate percentage and must be taken by the end of the next year. Starting in 2023, the penalty for failing to take a required minimum distribution is 25%. If the plan participant corrects the failure in a timely manner, the excise tax on the penalty is further reduced to 10%.

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