In the retirement income planning world, we often suggest people to save as much as they can for retirement. You might as well set aside as much tax-deferred funds as the law allows, because you're saving for retirement while often cutting your tax liability.

But when you retire and begin taking distributions from your retirement policies, you will begin paying taxes on that money. The larger your annual distributions, the more likely it is that you may owe taxes to the IRS each year. If you take especially large distributions, you risk paying more in taxes in retirement than you would have paid during your working years. No one wants to do that, of course, because it nullifies all of the tax savings from earlier years.

So how can you avoid overpaying taxes in retirement? It can be tricky to do, but you may want to calculate your expected tax bracket and compare it to your tax bracket from your working years. If it looks like you could be in a higher tax bracket in retirement, you may end up paying more in taxes. In some cases, your Social Security can also be taxed, and income-based Medicare premiums could be higher.

If it looks like you could be in a higher tax bracket in retirement, one strategy is to change your savings strategy as you near the end of your career. Sometimes it is beneficial to set aside after-tax dollars in a Roth IRA instead. The money is taxed now, as you earn it, and is not taxed when you take distributions later.

This tax problem underscores the importance of periodic consultations with your financial advisor or a tax professional. Meet regularly and discuss your goals and projected retirement income. If it looks like you may end up in a higher income tax bracket in the future, you should work together to create a plan to shelter your retirement income from excessive taxation.

14248 - 2015/3/10

The Social Security Administration is fraught with complicated rules and procedures, so it's understandable that the general public holds a lot of misconceptions about how the system works. Hopefully, our explanations of the following five myths will put your mind at rest.

Myth 1: Your payroll taxes are placed in an account under your name. When you retire and claim your Social Security benefits, you get that money back plus interest.

The truth: Benefits paid out today are covered by taxes collected today. Current retirees are supported by current workers. There is no individual account, set aside with your money in it.

Myth 2: If you're disabled by a serious disease, it can take years to receive Social Security disability benefits.

The truth: A program called Compassionate Allowances will speed up your disability claim, if you have one of the conditions specified by the program. Compassionate Allowances covers over 200 medical conditions. There are situations in which disability claims take years to process, but it's usually because those cases fall outside of the Compassionate Allowances program.

Myth 3: If you've never worked, you aren't eligible for Social Security benefits.

The truth: This myth comes from the fact that you must earn 40 work credits before you qualify for retirement benefits. However, someone who has never earned a single work credit can qualify based on their spouse's work record.

Myth 4: It's best to take your retirement benefits immediately when you turn 62. You could die before you reach full retirement age, and lose thousands of dollars.

The truth: Every situation is different, so there is no “right” time that everyone should claim their Social Security benefits. But the average life expectancy for men is 84, and for women it's 86. So unless you're in poor health already, you're unlikely to pass away before you receive your benefits.

Myth 5: If you continue working after you claim your benefits, Social Security will withhold some of the money each month and you'll lose it forever.

The truth: First of all, the earnings limit only applies to people who take their benefits before the full retirement age. After you reach your full retirement age, you can earn as much money as you want without fear of Social Security withholding part of your checks. But if you are subject to the earnings limit withholding, Social Security will recalculate your benefits after you reach full retirement age. You will likely receive credit for the amounts withheld.

If you hear any rumors or frightening news about Social Security, check with your financial advisor or Social Security representative. In many cases the story may have been false or very distorted, so there is no sense worrying about untrue myths!

14247 - 2015/3/10

Have you tried online shopping yet? If you haven't grown tired of crowded malls and long lines, you might be in the minority. More and more people are turning to online shopping, preferring the comfort of their own homes.

But sending sensitive information, such as your address and credit card numbers, to internet vendors can backfire. There are cyber criminals waiting for you to make simple mistakes that can cost you time, money, and your peace of mind. If you want to enjoy the convenience of online shopping, take the following steps to keep yourself safe.

Use your home connection. Don't use public internet connections, such as those offered by coffee shops and hotels, when you shop online. Those connections are often left open and unprotected, meaning anyone could swipe your personal information. Keep your online shopping at home or do it from trusted networks only.

Update your equipment. When the software developers who designed your smart phone, tablet, or computer software realize a potential security problem may exist, they release updates to fix it. So when your device wants to power off and install updates, go ahead and let it.

Only shop on safe websites. Some websites are more secure than others. Check for “https” at the beginning of the web address, or look for a lock symbol in the address bar. This indicates that the website is safe and trusted.

Only give information that is necessary to complete a purchase. Being asked to enter your credit card number and expiration date is reasonable. Asking for your Social Security number is not reasonable. Exercise extreme caution with any internet vendor that seems to be asking for more information than should be necessary.

Don't use your debit card. Using your debit card for online purchases could mean that you risk your entire bank account. Since most credit card companies offer fraud protection, use a credit card when you shop online.

Check your credit card statements. Don't just throw your credit card statement in the trash! Look at it carefully to make sure you recognize all of the purchases listed.

Remember: If it seems too good to be true, then it probably isn't true. You can certainly find good deals online, but exercise appropriate suspicion if a deal seems too good to be true.

14246 - 2015/3/10

You probably know that enrolling in a good life insurance policy is one of the best ways to protect your family. But that protection can be somewhat less valuable if you make one of these common mistakes with your life insurance plan. When you're shopping for a policy, try not to become overwhelmed with the wide variety of options available to you. Keep in mind that you can help to prevent problems by watching out for these pitfalls.

Forgetting the needs analysis. Some people skip this step, either because they aren't aware of the importance of a needs analysis, or they think they already know what type of policy they need. But performing a needs analysis is the best way to determine how much life insurance you need, and it helps you narrow down the type of policy that is right for your situation. A life insurance policy is a major financial decision, so take the time to get your most important questions answered.

Failing to compare policies with several providers. Your life insurance rates are determined by your provider's estimation of your risk. But each insurance provider has different ways of calculating risk, so policies worth the same amount can vary widely in price from one company to another. You don't want to select an expensive policy you can't really afford and drop the coverage later, so compare premiums between at least three different companies before selecting a policy.

Neglecting to reevaluate your needs. Your family's needs may change over the years, so why would you stick with the same old life insurance policy forever? Every two to three years, or after major life changes, you should perform another needs analysis to make sure your current policy still works for you. If you need more coverage or a different type of policy, talk to your insurance professional about upgrading to a new one so that you can continue to offer your family the best protection.

14245 - 2015/3/10