What Is the Retirement Saver's Credit and How Does It Work?

Can you explain how the retirement saver’s tax credit works? My spouse and I are looking for ways to boost our retirement savings beyond our 401(k)s.

If your income is low to moderate and you participate in your employer-sponsored retirement plan or an IRA, the Retirement Savings Contribution Credit (Saver’s Credit) is a frequently overlooked tool that can help boost your retirement savings. Here is how it works.

If you contribute to a retirement-savings account like a traditional or Roth IRA, 401(k), 403(b), 457, Thrift Savings Plan, Simplified Employee Pension or SIMPLE plan, the Saver’s Credit allows you to claim 10%, 20% or 50% of your contribution of up to $4,000 per year for married taxpayers filing jointly or $2,000 for individual taxpayers.

Keep in mind that a tax credit is not the same as a tax deduction. While a tax deduction merely decreases the portion of your income that is subject to taxes, a tax credit directly lowers your tax liability on a dollar-for-dollar basis and is therefore more advantageous.

To qualify, you must be at least 18 years old, not enrolled as a full-time student and not claimed as a dependent on another individual’s tax return. To qualify, adjusted gross income (AGI) in 2023 must be $73,000 or less for a married couple filing jointly, $54,750 or less if filing as head of household or $36,500 or less if you are a single filer. These income limits are adjusted annually to keep up pace with inflation.

To receive a credit for 50% of your contribution, you will need to have an income below $43,500 for married couples filing jointly, $32,625 if you are filing as head of household and $21,750 if you are a single filer in 2023.

The 20% credit rate applies to married couples earning between $43,501 to $47,500. For head of household filers, it is $32,626 to $35,625 and for individuals it is $21,751 to $23,750.

The 10% rate is for married couples with an adjusted gross income between $47,501 and $73,000. For head of household filers, it is $35,626 to $54,750 and for individuals it is between $23,751 and $36,500.

For example, say that you and your spouse earned $75,000 in 2023. Over the course of the year, you contributed $4,000 to your employer’s 401(k) plan. After deducting your 401(k) contribution, your adjusted gross income (AGI) on your joint return is now $71,000. Since your AGI puts you in the 10% credit bracket, and you have contributed the $4,000 maximum that can be considered for the credit and you are entitled to a $400 Saver’s Credit on your tax return.

It is important to note that the Saver’s Credit is an additional benefit on top of any other tax benefits you get for your retirement contributions. In the previous example, not only would you be entitled to the $400 credit, but you would also be able to exclude the $4,000 401(k) contribution from your taxable income. Therefore, if you are in the 12% tax bracket, this translates to $480 in savings, for a total estimated savings of $880.

How to Claim


To claim the Saver’s Credit, you will need to fill out Form 8880 (IRS.gov/pub/irs-pdf/f8880.pdf) and attach it to Form 1040 or 1040NR when you file your tax return.

For more information on the Saver’s Credit, see IRS Publication 590-A “Contributions to Individual Retirement Arrangements” (IRS.gov/pub/irs-pdf/p590a.pdf).

The IRS also offers an online assessment to help you determine if you qualify for the Saver’s Credit. To access it go to IRS.gov/Help/ITA and click on “Do I Qualify for the Retirement Savings Contributions Credit?” under the “Credits” tab. Please consult a tax professional for personalized guidance.

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.

Optimize Financial Plans For 2024

 

The first week of January is an excellent time to consider your financial plans for 2024. Some individuals are planning for retirement and should consider their contributions to a qualified retirement plan. Other individuals may have already retired and should consider their withdrawal strategies or required minimum distributions (RMDs). Individuals may benefit from a strategic plan to make wise financial decisions in 2024.

1. Retirement Contributions — The 2024 limit for your 401(k) contributions could be up to $30,500. The regular contribution is $23,000. If you are age 50 or older, there also is a potential $7,500 catch-up contribution amount. Individuals with moderate incomes may save $8,000 in an IRA. The regular contribution is $7,000 and the additional amount is $1,000 for age 50 and older. If you have not maxed out your 2023 IRA contribution, you can still make a transfer until April 15, 2024.

2. Tax-Free Retirement Accounts — While traditional IRA or 401(k) accounts are funded with pre-tax dollars, there are many benefits for making contributions of after-tax dollars into a Roth 401(k) or Roth IRA. Although the contributions are after-tax, your future retirement payouts will be tax-free. Some individuals have higher incomes and therefore do not qualify for a Roth IRA or their employer does not offer the Roth 401(k), but they may qualify for a Roth conversion. A traditional IRA or 401(k) can be transferred into a Roth IRA. There is a requirement to pay income tax on the transferred amount, but the future payouts will be tax-free.

3. Recently Retired — If you have retired during the past year or two, you are likely to be planning withdrawals from your savings account or investments. One of the main questions facing individuals is how much to start withdrawing. Most financial planners suggest withdrawing 4% of the account. While a conservative investor may choose to withdraw 3%, the 4% withdrawal rate is frequently advocated. Part of the withdrawal decision relates to your retirement budget. Individuals who retire may have significant expenditures on hobbies or travel. If you have substantial expenditures, you may have a larger retirement budget. You also might consider one-time expenses such as the purchase of a new vehicle or renovation of your home.

4. Fixed Payments — A popular method to receive fixed payments for a term of years or a lifetime is an annuity contract from a financial services company or a nonprofit. With the current higher interest rates on bonds, the rates on both commercial annuities and charitable gift annuities are higher. These fixed payments can be created for one or two lives. The combination of Social Security income, retirement account withdrawals and fixed annuity payments can provide a substantial income.

5. Estate Plan Review — January is an excellent time to update your estate planning documents. You should review your will (if you do not have a will you should plan to make one) and check the beneficiary designations on life insurance policies and retirement plans. Some individuals have held life insurance policies or retirement plans for many years. There may have been a change in family circumstances and the wrong beneficiary is listed on the plan document. You also should create a durable power of attorney for healthcare, which is referred to as an advance directive in some states. Your healthcare directive is designed to protect you. Your designated health care proxy will be able to make future health care decisions if you are incapacitated.

6. Required Minimum Distributions (RMD) — If you are age 73 or older in 2024, you will be required to take a distribution from your traditional retirement plans. You generally will start taking a withdrawal of 3.78% from a traditional IRA, 401(k) or 403(b) plan. The exception is for a couple with a spouse more than 10 years younger. There is a reduced withdrawal requirement for those couples. Another option to fulfill your RMD for 2024 is a qualified charitable distribution (QCD). The 2024 QCD limit is increased to $105,000 for individuals who are over age 70½.

Tips on Caring for an Aging Parent

Are there any resources that can help family caregivers? Taking care of my elderly parent while also working has become difficult to manage.

Taking care of an aging parent over a period of time – especially when juggling work and other family obligations – can be difficult. There are many resources available, however, to lessen the burdens. Here is what you should know.

Identify Your Needs


To determine and prioritize the help you need, make a detailed list of everything you do as a caregiver and the amount of time each task takes. This list can help you identify the times when assistance is needed and which tasks you can outsource.

Your list should also include the types of care needed. This may include companionship during the daytime or help with active chores such as shopping or running errands. With your list in mind, here are some tips and places you can contact for help.

Care Helpers


If you have siblings or other loved ones close by, ask them if they are available to help with specific tasks. You may also ask friends, neighbors or community group members if they could help too.

You should also consider local resources that may be available. Many communities offer a range of free or subsidized services that help seniors and caregivers with basic needs such as home delivered meals, transportation, senior companion services and respite services, which offer short-term care so you can take an occasional break. You may call the Eldercare Locator, a public service of the U.S. Administration on Aging, at 800-677-1116 for referrals to services in your area.

Additionally, there are a bevy of online services you can use to help save time on certain chores. For example, online grocery shopping and delivery as well as online pharmacy refills can be helpful. You can order meal-kits or pre-made meals online through numerous meal service companies and arrange needed transportation with ride sharing services.

You may want to consider hiring someone a few hours a week to help with cooking, housekeeping or personal care. The costs vary by location but can range from $17 to $32 per hour. To find caregivers, search online or work with a local home care agency.

Financial Aids


If you are handling financial tasks, make things easier by arranging direct deposits and setting up automatic payments for utilities and other routine bills. You may also want to set up an online banking service so you can pay bills and monitor account activity. For additional help, consider hiring a bill paying service which usually charges a flat fee with some starting at $99 per month. In addition, BenefitsCheckup.org is another excellent tool to find financial assistance programs that may help with finding utility discounts or in-home support services.

Technology Solutions


There are affordable technological devices that can help you check-in on your parent when you are at work. For example, there are medical alert systems and smart speakers that help with communication and allow someone to call for help if needed. Home video cameras with two-way audio allow you to see, hear and talk to your parent when you are away. Electronic pill boxes can also be set up to automate medication and send a notification if a dose is missed. You can also coordinate care with other caregivers, friends or family through apps or websites.

Other Resources


You can search online for other organizations that provide state-by-state listings of caregiving programs and services. Some national organizations also provide information unique to certain challenges such as those of dementia caregivers. The U.S. Department of Veterans Affairs (caregiver.va.gov) also offers caregiver support services to veterans and their spouses.

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 29, 2023

Time is Short for IRA Gifts to Charity

As December 31 approaches, owners of traditional IRAs who are over age 70½ may be considering 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 those who are age 73 or older is a QCD may fulfill part or all of your required minimum distribution (RMD) for this year.

Because your IRA custodian may take time to process a QCD and it must be completed by December 31, it is important to proceed promptly with an IRA gift. During 2023, an IRA owner may give up to $100,000 directly from the IRA custodian to a qualified charity. Another QCD option is a one-time gift of up to $50,000 for a charitable gift annuity (CGA), charitable remainder unitrust (CRT) or charitable remainder annuity trust (CRAT).
  1. Direct IRA Rollover to Charity — A traditional IRA owner should contact his or her IRA custodian to start the process for a QCD. While distributions from a traditional IRA are normally taxable, the QCD rollovers will be tax-free if they are paid directly to a qualified charity. The QCD is made through a check payable to the charity. The IRA owner must be age 70½ or over and the QCD cannot exceed the 2023 limit of $100,000. If spouses are both over age 70½, then the $100,000 per person limit may allow a couple to distribute up to $200,000 per year to a charity. Because the QCDs are not taxable, there will be no charitable deduction.
  2. IRA Rollover to Life Income Plan — A traditional IRA owner may contact his or her IRA custodian to make a QCD up to $50,000 for a CGA, CRUT or CRAT. The gift annuity or charitable trust must pay 5% or more and can only benefit the IRA owner, their spouse or both. While the $50,000 IRA payout for a gift annuity or charitable trust is not taxable, the annuity or trust payouts will be taxable ordinary income and there will be no charitable deduction.
  3. 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 custodian. This will show 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.
  4. How To Receive a QCD Acknowledgment — Your QCD is not deductible as a charitable contribution. However, with a direct IRA rollover you are required to obtain a written QCD acknowledgment from the charity prior to filing your tax 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". For an IRA Rollover to Life Income Plans, the acknowledgement should also include a statement that the donor received "no goods or services in exchange for the gift", "except for the [CGA/CRUT/CRAT]" and include the funding value and the approximate value of the donor's benefit (i.e. the present value of the income interest or contract value). 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. 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.

How to Ease the Winter Blues

What can you tell me about seasonal affective disorder? Since I retired, I feel sad and tired during the winter months.

If you feel depressed during the winter but feel better in spring and summer, you may have seasonal affective disorder (SAD), a seasonal depression that affects approximately 5% of Americans. In most cases, SAD is related to the decreased amount of sunlight during the winter months. Reduced sunlight can disturb natural sleep-wake cycles and other circadian rhythms that affect the body. It also causes a drop in the brain chemical serotonin, which affects mood, while increasing the levels of melatonin, which can make you feel more tired and lethargic.

If you think you may have SAD, you should schedule an appointment with your health care provider to discuss your concerns. You may also take a SAD "self-assessment" test which is readily available online or provided by health organizations. While these self-assessment tests offer some insights, they are not intended as a substitute for professional medical advice. If you find that you have SAD, here are several treatment options and some non-prescription remedies that can help.

Light therapy: One possible treatment for SAD involves sitting in front of a specialized light therapy box for 20 to 30 minutes a day within the first hour of waking up in the morning. Light therapy mimics sunlight and affects brain chemicals linked to mood.

While you can buy a light box without a prescription, it is advisable to use it under the supervision of a health care provider and closely follow the manufacturer's guidelines. Most health insurance plans typically do not cover the cost.

Some light therapy lamps provide 10,000 lux of illumination, stronger than typical indoor lights. These lamps also offer a diffuser screen that filters out ultraviolet rays and projects downward from the eyes. To find the most suitable light therapy option for your needs, consult with your healthcare provider for recommendations or conduct online research.

Cognitive behavioral therapy: While SAD is considered a biological issue, identifying and changing thought and behavior patterns can also contribute to symptom relief. There are therapists you can seek who specialize in cognitive behavioral therapy and have experience in treating SAD. To locate a local therapist, you can ask your healthcare provider for a referral or search online for reputable therapists in your area.

Lifestyle remedies: Some other things you can do to help alleviate your SAD symptoms include making your environment sunnier and brighter. Open your blinds, sit closer to bright windows and go outside as much as you can. Even on cold or cloudy days, outdoor light can help, especially if you spend some time outside within two hours of getting up in the morning. Moderate exercise such as walking, swimming, yoga and tai chi can also help alleviate SAD symptoms, as can social activities.

If you sense that your symptoms extend beyond typical SAD, consult your healthcare provider to ensure it is not indicative of a more serious condition. If you or someone you know is struggling with mental health issues, do not hesitate to seek professional help or call the National Alliance on Mental Illness HelpLine at (800) 950-6264.

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 15, 2023

Deduct Your End of Year Gifts

Many nonprofit supporters make gifts in December. These gifts often may be larger and are an excellent way to benefit a nonprofit. It is important to understand how to make a gift of cash or property and qualify for a deduction this year.

The basic rule is that a gift to a nonprofit is deductible when the property or cash is delivered to a charity. The delivery rules are dependent on the type of property gifted and the timing of the transfer. The delivery is usually complete when the nonprofit receives the property.

There are several rules, however, that apply to gifts of cash, checks or property.

1. Gift of Cash — Cash is deductible when it is transferred to the nonprofit. A gift of cash is different from making a pledge or signing a note to make a gift in the future. With a pledge or note, there is no deduction until there is an actual transfer of cash to charity.

2. Gift by Check — Checks are usually deductible when placed in the mail, even though the final transfers occur when the checks clear the banking institution. For example, if you use the U.S. Mail to send a check by December 31, the gift is completed on the date of the postmark. As long as the check clears the bank, your deduction is honored this tax year.

3. Gift by Credit Card — Credit cards are deductible when the charges are made on the account. Because credit card charges are typically created immediately, the credit card gift is deductible this year. If a gift is made by credit card on December 31 this year and the bill is paid in January, the deduction can be taken for this year. Your credit card statements will show the name of the charity and the transaction date.

4. Gift of Stock — Stock may be transferred by hand delivery, electronic delivery or mail. A stock certificate may be endorsed and hand delivered. The delivery date is the date the representative for the charity receives the stock certificate. You may also obtain a stock power and mail the certificates in one envelope and the witnessed stock power in a second envelope. If U.S. Mail is used for the transfer, the transfer is effective on the date mailed. Stock may be held in a "street account" with your financial services firm. In this case, the nonprofit may create a new account with the same firm and the transfer can occur rapidly by moving stock from your account to the charity account. Be sure to save the financial service institution’s written acknowledgment that the transfer has been accomplished to document the transfer.

5. Gift of a Mutual Fund – Your shares or units in a mutual funds may be transferred to the charity by your custodian. Mutual fund gifts should be planned in advance, because there may be a delay before the actual transfer takes place.

6. Gift of Real Estate — Legal title to real estate passes when you deliver a signed and notarized deed to the nonprofit. However, it is best to have the deed recorded with the county registrar of deeds before December 31.

7. Gifts of Art — The delivery date for a gift of art is the date the nonprofit receives actual possession of the work of art. Title must also be transferred to the charity on that date. A charity must obtain actual physical possession of a gift of art. Special rules apply to a gift of a fractional interest in an artwork.

The nonprofit you make a charitable contribution to will also provide you with a written receipt. This receipt will include the name and address of the nonprofit organization, the date of the contribution, a general description of the property and will state if any goods or services were received.

Ten Reasons to Update Your Estate Plan

 

You have completed a will and perhaps a revocable living trust. Your durable power of attorney for healthcare and a living will are in place. All of your records are safely in place and carefully organized.

So you now are finished with your estate planning. Or are you? Will there be changes in your circumstances or your family that should lead to a review of your plan? Could some events cause you to need to revise or update the plan?

Yes, there are a number of reasons to consider revising or updating your plan. These include any of the following reasons:

1. New Children, Grandchildren or Other Heirs


Your estate plan almost certainly makes provision for children and other heirs who are living when you pass away. If you have a specific transfer to one child, a new child may receive a smaller than intended inheritance.

For example, John Smith had a $1 million estate and left a $400,000 residence to child A. He then divided the balance of the estate with 1/6 of the balance to child A and 5/6 to child B. If a third child is born, depending upon state law, the child might receive nothing or perhaps would benefit from a portion of the residue. In either case, the uncertainty could lead to estate litigation or to family strife.

If you have a sizeable estate and there are large specific bequests, the arrival of a new heir is a good time to review your plan. One option is to transfer assets to the heirs "then living" when you pass away.

If the estate is $1 million, in some states a child C who is born later would receive 1/3 of the estate. This could dramatically change the benefit for child B and leave her with a reduced inheritance. In addition, child C could be a minor or a very young adult and not be capable of managing his or her property. For several reasons, the arrival of a new heir makes a review of your plan very important.

2. Move to a Different State


If you are married and move to a different state, there may be a change in the laws that affect ownership. Some states are called "common law" property states and some are "community property." If you move from one state to another and change in either direction, it may be important to clarify the ownership of your property as separate property or joint property.

For individuals with moderate to larger estates, there could be significant estate or inheritance taxes. Several states have inheritance taxes that will apply at lower levels than the federal exemption per person. Depending on who among your relatives receives your property, a new state may have a substantial tax.

Finally, many states have specific rules on durable powers of attorney for healthcare, living wills or advance directives. If you acquire permanent legal residence in the state, your doctors will expect that your medical planning documents reflect their state law.

3. Sale or Purchase of a Major Asset


You may have a major real estate asset or a business that is to be transferred to one of your heirs. If that property is sold or substantially increases in value, your entire plan could change. For example, if a property greatly increases in value and there is a large estate tax that is paid out of the residue of your estate, the beneficiary of that specific property could receive a much larger inheritance than you intend. Those children or other heirs who are receiving the residue could find their inheritance greatly reduced by estate tax paid on the asset transferred to the first child.

Alternatively, if the first asset is sold, a child may receive a smaller than intended inheritance. Therefore, a significant sale or purchase is a good time for an estate planning review.

4. Reaching Age 73


The four types of estate property are generally cash and cash equivalents, stocks, real estate and qualified plans. Over the years, your qualified retirement plan may become a large portion of your estate. Your IRA, 401(k) or other qualified plan will require distributions to start on April 1 of the year after you reach age 73.

If you pass away before the entire plan is paid out to you during your retirement years, the balance is transferred to your designated beneficiary. Because retirement plans have grown substantially over the past decade, it's very important to review your beneficiary designations. Many individuals pass away and the plan value is transferred to beneficiaries who have been selected 10, 15, and even 25 years earlier. There could be many reasons why you would want to update that beneficiary designation and age 73 is a logical time to do so.

5. Your Selected Beneficiary is Deceased


In many families there are unmarried brothers or sisters. It is quite common for these individuals to receive an inheritance and to remember the surviving brothers and sisters in their plans. However, even if there are two or three unmarried brothers or sisters, one will inevitably be the survivor and hold most of the assets. If you are remembering a sibling in your plan, there is a substantial possibility he or she will pass away before you do. In that case, it is useful to revise the plan and select a new recipient of that share of your estate.

6. Divorce or Remarriage


Estate plans for single persons are quite different from those of married couples. A single person who transfers assets to a former spouse will not qualify for the unlimited marital deduction. While property settlements are typically handled during the dissolution of marriage proceedings, there are many cases where individuals forget to change beneficiary designations on retirement plans and insurance policies. If an individual later remarries and is survived by their new spouse, there is a high likelihood of litigation between the ex-spouse and the new spouse if the individual forgot to update his or her beneficiary designations. Therefore, this person’s plan and beneficiary designations should always be reviewed in the event of a divorce or remarriage.

7. Substantial Change in Value


If someone’s estate increases or decreases significantly in value, there can be major impact on beneficiaries. For example, Mary has three children, Anne, Bob and Charlie. She leaves a home valued at $300,000 to Anne, a large ranch on desert land valued at $400,000 to Bob and the liquid assets to Charlie, who has the greatest financial need. While Mary is in a nursing home and no longer able to change her will, a utility builds windmills on most of the desert ranchland and pays large annual lease payments. The value of the desert ranch dramatically increases. When Mary passes away, Bob receives the ranch, not worth $400,000 but $8 million. Bob receives an inheritance far greater than Anne or Charlie.

8. Adding a Major Property to a Living Trust


If you have a substantial estate, you may hold your real estate in a living trust. If you invest in real estate or acquire a major new property and transfer that to the living trust, it will be useful to review the plan. In some circumstances, there may be different beneficiaries for the living trust than for your qualified plans and life insurance. The addition of a high value asset to the living trust could increase the benefits for children receiving shares from the trust in comparison to the rest of your heirs.

9. Selected Executor or Trustee Not Available


With a will or a revocable living trust, you may also select a successor executor or trustee. While this usually will handle the situation in which the primary executor or trustee predeceases you, it still is useful to review your plan if one of the designated individuals passes away. You can easily select a new primary executor or trustee with an appropriate backup person.

10. Passage of Time


Estate plans are affected by changes in your asset value, by changes in your family, and potentially by changes in federal or state law. Therefore, it is useful every three to five years for you to sit down with your attorney and review your plan. Given all the potential areas that can change, it is quite likely that you may wish to modify some portion of the plan.

Smart Home Devices

My parent lives alone but has mobility challenges and would like to automate functions at home to make it safer and more convenient. Could you recommend some smart home devices that are helpful?

There are a wide variety of smart home products such as smart lights, video doorbells and voice-activated speakers that can be very useful for older adults. These devices add safety and convenience to a home. The devices can be controlled by voice or smartphones, which is helpful for those who have mobility issues or reduced vision. Smart home technology can also provide family members peace of mind by giving them the ability to electronically monitor their loved ones when they cannot be there.

If you are interested in adding smart home products to your parent’s house, ensure that there is Wi-Fi access and a smartphone, tablet or smart speaker to control operations. To help you get started, here are types of devices to consider.

Smart speakers: A smart speaker can serve as the brains of a smart home, controlling devices with voice commands or automating functions around the house. These devices can also play music, read audiobooks, make calls, set timers and alarms, provide reminders for medications and appointments, check traffic and weather, answer questions and call for help in emergency situations.

Smart light bulbs: Falls at home can be caused by fumbling around in a dark room looking for a light switch. A smart lighting system turns lights on or off by voice command, smartphone or tablet. Smart light bulbs can also change brightness and color and be programmed to turn on and off at scheduled times.

Smart plugs: These small units plug into a standard outlet and connect to the internet. Your parent can control a device, such as a space heater or a coffee maker, by voice command or by programming a pre-set time.

Video doorbell: Safety is also a concern for older adults especially those who live alone. A video doorbell allows your parent to see and speak with visitors at the door without having to walk over and open it.

Smart locks: For convenience and safety, a smart lock gives your parent and others keyless entry. This provides customized access and lets you monitor who comes and goes from the house.

Smart thermostat: A smart thermostat can program a home’s temperature. You can also manually control it with voice command or through a smartphone. You can remotely monitor temperature as well.

Smart smoke alarms: A smart smoke detector will send voice alerts to warn which room the fire is in. It also allows you to check the room before a siren sounds and to silence the alert from a smartphone if there is no fire. It can also send an alert to family or caregivers, letting them know of a potential problem.

Stovetop shut-off: To prevent home cooking fires, automatic stovetop devices will turn off electric and gas stovetops when left unattended. These devices can also monitor stove activity and alert you via text or email.

Medical alert system: Wearable wrist or necklace emergency buttons allow your parent to call for help in case they fall or need assistance. Many systems provide voice-activated and fall detection features that connect your parent to a designated contact when an incident occurs. These devices also have smartphone apps that provide location tracking or monitor daily activity.

Cameras and smart sensors: If your parent wants more in-depth monitoring, indoor cameras can be installed so you can see, hear and talk to your parent from your phone. As an alternative, smart contact sensors can keep you updated. For instance, sensors on exterior doors will alert you when someone comes and goes and those on a refrigerator door will let you know if someone has the door open.

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 8, 2023

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

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