POCKETBOOK: Week ending March 18, 2017

  • 7be6974a-a70c-449c-b75f-92ef077bf8a2 Social Security and your taxes

It has been estimated that each day 10,00 Baby Boomers retire. Many, while not all, then begin looking forward to and accepting their well-earned Social Security checks.

But that new income isn’t always tax-free. No, no Nanette. A lot depends upon the age at which you begin collecting, the state in which you live  and of course any other work-related income.

To make us smarter than ever, here is one of the five questions included from a Journal of Accountancy “How much do you know about Social Security? “ quiz . I found it at their website, journalofaccountancy.com, and thought the info valuable.

I will publish the other four questions at a later time but until then you can test your Social Security smarts here:

“Andy chose to file for his Social Security worker’s benefit in 2016 when he turned 62. However, in February 2017 he decided to take a part-time job to earn some extra income. He earns about $2,000 per month before taxes and receives about $500 per month in dividend payments from his investment portfolio. Which statement is correct about the impact on his Social Security benefits?

  1. His Social Security benefits will all be taxable because he has earned income over $1,500 per month prior to his full retirement age.
  2. His Social Security benefits will be reduced by $1 for every $3 of earned  income over a monthly threshold of $1,410 in 2017.
  3. His Social Security benefits will be reduced by $1 for every $2 of earned income only over a monthly threshold of $1,410 in 2017.
  4. His Social Security benefits will be 85% taxable because he has earned income over $1,500 per month prior to his full retirement age.”

To find the correct answer, scroll down to the last entry –found under Mutual Funds— in this week’s Pocketbook.

  • Market Quick Glance

Mixed returns for the major indices over the past week with one bright spot: NASDAQ did reach a new high at the close of business on –of all days—Friday, March 17, St. Patrick’s Day.

Below are the weekly and 52-week performance results— including the dates each has reached its high according to data from CNBC.com. Data is based on prices at the close of business for the week ending March 17, 2017.

-Indices:

-Dow Jones +5.83% YTD, up a tad from last week’s 5.77%

  • 1yr Rtn +19.64% down from last week’s 22.99%

The DJIA reached an all-time high of 21,169.11 on March 1, 2017.

-S&P 500 +6.23% YTD up from last week’s 5.97%

  • 1yr Rtn +16.55% down from last week’s +19.25 %

The S&P 500 reached an all-time high of 2,400.98 on March 1, 2017.

-NASDAQ +9.62YTD up from last week’s +8.89%

  • 1yr Rtn +23.58% down from last week’s 25.731%

The Nasdaq reached its all-time high of 5,912.61 on March 17, 2017.

–Russell 2000 +2.53 YTD% up from last week’s +0.60 %

  • 1yr Rtn +27.52% down from last week’s +28.32%

The Russell 2000 reached its all time high of 1, 414.82 on March 1, 2017.

-Mutual funds

A better week for the equity funds as, at the close of business on Thursday, March 16, 2017, the average total return for U.S. Diversified Equity Funds was  5.23%, according to Lipper. That’s up from the previous week’s close of 4.02%.

It’s still World Equity Funds that are bringing home the bacon with the average return on the 4,500+ funds under its heading were up on average 8.46%. That’s over a 300-basis point gain in one week.

Fund types making money under that heading include: India Region Funds, up on average 17.53%; Latin American Funds, up 12.41%; China Region Funds, up 12.3%; Pacific Ex. Japan Funds , up 11.83%; and Emerging Markets Funds, up 11.09%.

Visit www.allaboutfunds.com for more information about how various equity and fixed-income funds have rewarded investors over the short-and long-term, based upon Lipper data. Short-term meaning weekly and monthly performance returns; longer-term includes quarterly, year-to-date, 1-yr, 2-yr, 3-yr and 5-yr returns.

  • And the answer is: C

“Prior to full retirement age (FRA), earned income above a threshold ($16,920 per year or $1,410 per month in 2017) reduces the Social Security benefit by $1 for every $2 earned. The first year of earning, this is tested monthly, with subsequent years tested annually. In the year in which you reach your FRA, the benefits are reduced by $1 of every $3 eanred over a monthly threshold of $3,780. After FRA, additional earnings have no impact on the mount of benefits received. Taxability of benefits is a separate issue, but neither indicated above is correct.”

And you thought things would be simpler in retirement.

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