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Investment Insight
2nd Quarter 2010 |
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| Health Care Reform
After months of debate, the health care reform bill has finally passed and has been signed into law by President Obama. It contains over $400 billion in revenue raisers and new taxes on employers and individuals.
The Patient Protection Act, as amended by the House Reconciliation Act, will fundamentally alter the health care landscape for individuals and employers. All individuals not covered by Medicaid or Medicare will be required to obtain health care coverage or pay penalties. Employer-provided coverage will generally satisfy the universal coverage requirement. Lower-income individuals, as well as some middle-class families, will receive a credit or voucher to help pay for health insurance. Employers electing not to offer qualifying coverage will be subject to an additional tax to help finance the health care coverage for their employees. Exceptions are made for small businesses.
KEY OFFSETS
To help finance health care reform, the Patient Protection Act, as amended by the House Reconciliation Act, includes (1) a 40 percent excise tax on high-dollar health insurance plans to begin in 2018, (2) an increase in Medicare payroll taxes starting in 2013 on taxpayers in the $200,000-plus income category ($250,000 for joint filers), and (3) new fees on certain health-related industries. A dozen other "revenue raisers" are also included in the final bill. |
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Click here, to view the full CCH Tax briefing, which highlights:
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Are Retirees' Health Costs as Steep as Some Say?
The latest report comes from Fidelity Investments, which on March 24, said the average 65 year-old couple retiring today will need $250,000 to pay for medical expenses in retirement. And that figure doesn't include potential nursing-home costs, which average $80,000 per year in today's dollars.
The answer to paying health care costs are two-fold: Either you save enough to self-fund the worst-case scenario, which according to one research firm could be as high as $807,000, or you buy long term care insurance. If, by chance, you decide to set aside $250,000 to fund your health care expenses in retirement, one of two things might happen based on your household's health profile. Either you end up with a fund for discretionary expenses (cruises, Broadway shows, trips to Disney with the grandkids, and the like) for you and/or your survivors, or you have money to pay for a portion of your health care expenses.
What's the takeaway here? In short, experts suggest that if you do plan to pay for health care expenses as you go, consider that it could represent upwards of 20% of your expenses, and health care costs are likely to rise faster than other expenses such as food or housing.
See full story, located at Market Watch. (free registration may be required.) |
Student Loans Overhauled
After stripping banks of their role as middlemen in the federal student loan process, the government is now the primary lender to students. Buried deep in the package of health care reforms that became law March 30 are provisions that promise to shake up the student loan industry.
By eliminating taxpayer subsidies to corporate middlemen who marketed and originated federal student loans, the changes will raise more than $60 billion over the next 10 years, with the savings being spent on more and bigger grants, easier repayment terms and even a little deficit reduction, the Obama administration says.
How will the student loan reforms affect students wishing to take out federal loans for college? Most student borrowers won't notice much difference, since most of the changes are behind the scenes. All colleges will arrange for students to take their federal Stafford loans directly from the government. The biggest immediate downside for students is that some won't get the small discounts that certain lenders offered on Stafford loans. But all undergraduates will continue to be eligible to borrow Stafford funds of at least $5,500 (and, depending upon their age and year in college, up to $12,500) at an interest rate that cannot exceed 6.8% a year.
Is this a federal "takeover" of the student loan program? Some say, only a little. Until now, the federal government guaranteed the private lenders that made Stafford and PLUS loans that it would repay 97 cents on the dollar for loans that go into default. Now the government will make all the loans, thus taking on the last 3% of the risk, and keep the billions of dollars it used to pay to private companies for making the loans. See full story, located MSN Money. |
Tax Records to Keep or Discard
Basic records are documents that everybody should keep. Although the Internal Revenue Service doesn't require you to keep your records in a particular way, it does urge taxpayers to keep them "in an orderly fashion" and in a safe place.
Keep in mind that while the basic IRS review period is three years, there are exceptions -- in the tax collector's favor.
If the agency suspects you've underreported your income or has questions about a worthless stock write-off, look out. When examiners believe you've shorted your income amount on a return by 25 percent or more, they can come asking questions up to six years later. Add another 12 months for queries about that bad investment.
See full story, located at Yahoo Finance, to view the records to keep and how long to keep them.
More details on tax record keeping are available in IRS Publication 552, Recordkeeping for Individuals. |
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Horan Securities, Inc., doing business since 1996.
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