I think most of us recognize that health care reform was needed in this country. If you have been denied coverage, had a pre-existing condition, were unemployed without access to employer-sponsored health coverage, were impoverished because you or a family member exceeded your “cap” or maximum payout for health claims, etc., then the only alternative was to live without health coverage, and that seems to be quite unacceptable in a country such as ours.
However, the health care reform bill, or “Obama care,” as it is has been called, which was forced into law, and admittedly not read or understood by many of our legislators who passed it, is quite severe and places great hardship, increased costs, mandates and taxes on those of us employed, covered and paying taxes as well as to the employers who must implement the new requirements. The fact that this bill would be passed by our “representatives” without understanding and debate and recognition of the true costs of implementation is heinous in and of itself.
In fact, those already covered by employer-sponsored and individual health care plans are already seeing their premiums increase, and they will continue to do so, as the insurance companies prepare for the current and future costs of implementation. Many of the mandates in the new law are to be phased in or enacted over the next four years.
With all of that said, what then are the new costs and taxes to be borne by the young or old, working or retired? Indeed, the fact that you are retired or about to retire does not make you immune from paying your “fair share”!
The following are just some of the currently recognized costs and new tax increases coming our way as the provisions and requirements of this bill are still being evaluated. Additionally, this Obama care fiasco will require a myriad of new agencies and bureaucracies just to oversee it!
Well, to start, dividend income, on which many people, especially seniors rely, has been taxed at 15 percent up to this point. The new health care law will now tax dividend income as ordinary income up to 39 percent. It is yet to be determined what negative impact this will have on investing, as dividends are often the results of income from investments or investments in the growth of companies and our economy.
Are you thinking of selling a highly appreciated asset, or even your home? Heretofore, if you held an appreciated asset for more than one year before you sold it, your gain would be taxed at 15 percent, considered long-term capital gains. If you sold that asset for gain within one year, you would be taxed at 20 percent. Surprise! Under the new law, the capital gains taxes will now be 20 percent, regardless of when you sell the asset. For many, this represents a tax increase in excess of 25 percent.
And now for the biggest tax surprise of all, for all of us especially seniors who are in or approaching retirement: embedded within the reform law is the provision that requires you to pay a NEW 3.8 percent tax on the sale of your home. For a home valued and sold for $400,000, you will be required to pay in excess of $15,000 in addition to other closing costs, realtor fees and other costs.
As I write this, the new law, new taxes and requirements contained therein are still being evaluated and made sense of. The new taxes and fees outlined herein are not necessarily fully inclusive..
What this means is that you have to make sure that your clients’ assets are protected and that they are assured, especially in retirement, of a never-ending, increasing stream of income to support them for the rest of their life. Also, there are several guaranteed-income and other planning strategies to assure that your assets remain intact for any heirs and other planning solutions to maintain what they’ve accumulated, despite the new laws and increasing taxes coming our way. One last note: long-term care coverage gives your client the quality of care they deserve in the future and doesn’t force them to “spend down” their assets and become impoverished.
*Stef Loisou represents nearly 40 years of financial planning experience and is guided by his SWAN portfolio planning strategies that allow his clients to Sleep Well at Night! Visit his website at www.incomeforlifeplanning.com.