Articles for December 2017

Congress Passes the Tax Cuts & Jobs Act

What will the near-term impact be?

On December 20, Congress passed the Tax Cuts & Jobs Act, sending the final version of the GOP tax reform bill to President Trump’s desk. The legislation alters the Internal Revenue Code to a degree unseen since the 1980s, altering income tax brackets, marginal tax rates, key deductions and exemptions, and the taxation of corporations and pass-through businesses. These are just some of the adjustments.1

How many taxpayers could benefit from all this reform in 2018? Earlier this month, the financial website Business Insider ran some numbers to see how single, childless taxpayers earning $25,000, $75,000, and $175,000 a year would fare in the wake of the reforms. It did so for both the House and Senate versions of the bill. The final Tax Cuts & Jobs Act is based on the Senate version, and under the Senate tax plan, Business Insider projected 2018 tax savings of $369 for a childless taxpayer at the $25,000 level, $2,129 at the $75,000 level, and $5,240 at the $175,000 level. The calculations assumed these taxpayers would use the standard deduction in 2018, rather than itemize.2

Using the same three income levels, and again assuming use of the enlarged standard deduction, it also projected 2018 federal income tax savings for families of four with children no older than 16. With the Senate bill as the model, the projected 2018 tax savings were $100 for such a family at the $25,000 level, $2,244 at the $75,000 level, and $3,095 at the $175,000 level.3

Retirees are also poised to receive significant tax savings. The non-partisan Tax Policy Center projects an average tax savings of $1,000 for older Americans when they file their 2018 federal taxes in 2019. For seniors earning between $33,000-$56,000, the TPC forecasts a federal tax cut of around $300 (roughly 9%). Seniors earning less than $33,000 currently pay little or no federal income tax and would see little or no benefit from the changes.4

One interesting detail in the Tax Cuts & Jobs Act has merited little coverage. That is the application of the chained Consumer Price Index to the Internal Revenue Code – a move which affects inflation calculations. The chained CPI usually reflects less inflation than the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-U), upon which Social Security cost-of-living adjustments are based. This raises the possibility of smaller Social Security COLAs in the future. At this point, Social Security COLAs are not dependent on the movement of the chained CPI.5The passage of the reforms also opens a door to new conversations about Medicare, Medicaid, and Social Security reform, as the national debt is projected to increase by more than $1 trillion with the new legislation.4,5

Households may want to make some moves before the new rules take effect. As marginal tax rates are reduced for 2018, some taxpayers might want to defer a little income into next year. The charitably minded may end up contributing more to qualified non-profit organizations in 2017 than in 2018, as the value of itemized deductions will be greater this year with a lower standard deduction. Lastly, those who like to itemize may be compelled to prepay 2018 property taxes before this year ends, given the $10,000 cap on the state and local taxes deduction in 2018.6

The Internal Revenue Service has quite a challenge on its hands. Web pages, forms, and publications need to be revised and the agency faces immediate pressure to issue new withholding tables. On December 17, the I.R.S. stated that worker paychecks would not reflect the impact of the Tax Cuts & Jobs Act until February – which means employees may have to make late-2018 withholding adjustments.7

Tax season is almost here, so talk with your CPA or preparer soon. A conversation may reveal new opportunities for savings, and help you identify your tax planning priorities for the near future.

Mike Moffitt may be reached at Ph# 641-782-5577 or email: mikem@cfgiowa.com

Website: www.cfgiowa.com

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Michael Moffitt is a Registered Representative with and Securities are offered through LPL Financial, Member FINRA/SIPC. Investments advice offered through Advantage Investment Management (AIM), a registered investment advisor. Cornerstone Financial Group and AIM are separate entities from LPL Financial.

Citations.

1 – cbsnews.com/news/second-house-vote-new-tax-bill-2017-12-20-live-updates/ [12/20/17]

2 – businessinsider.com/trump-tax-plan-take-home-pay-2017-9 [12/2/17]

3 – businessinsider.com/senate-tax-plan-affects-family-take-home-pay-2017-11 [12/2/17]

4 – forbes.com/sites/howardgleckman/2017/12/15/what-the-gop-tax-cut-will-mean-for-older-adults/ [12/15/17]

5 – fool.com/retirement/2017/12/18/the-1-gop-tax-provision-social-security-recipients.aspx [12/18/17]

6 – cbsnews.com/news/3-moves-to-make-by-end-of-2017-if-gop-tax-bill-becomes-law/ [12/19/17]

7 – nytimes.com/2017/12/18/business/irs-tax-bill.html [12/18/17]

 

 

Year-End Charitable Gifting

What should you keep in mind as you donate?

Are you making charitable donations this holiday season? If so, you should know about some of the financial “fine print” involved, as the right moves could potentially bring more of a benefit to the charity and to you.

To deduct charitable donations, you must itemize them on I.R.S. Schedule A. So, you need to document each donation you make. Ideally, the charity uses a form it has on hand to provide you with proof of your contribution. If the charity does not have such a form handy (and some charities do not), then a receipt, a credit or debit card statement, a bank statement, or a cancelled check will have to suffice. The I.R.S. needs to know three things: the name of the charity, the gifted amount, and the date of your gift.1

From a tax planning standpoint, itemized deductions are only worthwhile when they exceed the standard income tax deduction. The 2017 standard deduction for a single filer is $6,350. If you file as a head of household, your standard deduction is $9,350. Joint filers and surviving spouses have a 2017 standard deduction of $12,700. (All these amounts rise in 2018.)2

Make sure your gift goes to a qualified charity with 501(c)(3) non-profit status. Also, visit CharityNavigator.org, CharityWatch.org, or GiveWell.org to evaluate a charity and learn how effectively it utilizes donations. If you are considering a large donation, ask the charity involved how it will use your gift.

If you donated money this year to a crowdsourcing campaign organized by a 501(c)(3) charity, the donation should be tax deductible. If you donated to a crowdsourcing campaign that was created by an individual or a group lacking 501(c)(3) status, the donation is not deductible.3

How can you make your gifts have more impact? You may find a way to do this immediately, thanks to your employer. Some companies match charitable contributions made by their employees. This opportunity is too often overlooked.

Thoughtful estate planning may also help your gifts go further. A charitable remainder trust or a contract between you and a charity could allow you to give away an asset to a 501(c)(3) organization while retaining a lifetime interest. You could also support a charity with a gift of life insurance. Or, you could simply leave cash or appreciated property to a non-profit organization as a final contribution in your will.1

Many charities welcome non-cash donations. In fact, donating an appreciated asset can be a tax-savvy move.

 You may wish to explore a gift of highly appreciated securities. If you are in a higher income tax bracket, selling securities you have owned for more than a year can lead to capital gains taxes. Instead, you or a financial professional can write a letter of instruction to a bank or brokerage authorizing a transfer of shares to a charity. This transfer can accomplish three things: you can avoid paying the capital gains tax you would normally pay upon selling the shares, you can take a current-year tax deduction for their full fair market value, and the charity gets the full value of the shares, not their after-tax net value.4

You could make a charitable IRA gift. If you are wealthy and view the annual Required Minimum Distribution (RMD) from your traditional IRA as a bother, think about a qualified charitable distribution (QCD) from your IRA. Traditional IRA owners age 70½ and older can arrange direct transfers of up to $100,000 from an IRA to a qualified charity. (Married couples have a yearly limit of $200,000.) The gift can satisfy some or all of your RMD; the amount gifted is excluded from your adjusted gross income for the year. (You can also make a qualified charity a sole beneficiary of an IRA, should you wish.)4,5

Do you have an unneeded life insurance policy? If you make an irrevocable gift of that policy to a qualified charity, you can get a current-year income tax deduction. If you keep paying the policy premiums, each payment becomes a deductible charitable donation. (Deduction limits can apply.) If you pay premiums for at least three years after the gift, that could reduce the size of your taxable estate. The death benefit will be out of your taxable estate in any case.6

Should you donate a vehicle to charity? This can be worthwhile, but you probably will not get fair market value for the donation; if that bothers you, you could always try to sell the vehicle at fair market value yourself and gift the cash. As organizations that coordinate these gifts are notorious for taking big cuts, you may want to think twice about this idea.7

You may also want to make cash gifts to individuals before the end of the year. In 2017, any taxpayer may gift up to $14,000 in cash to as many individuals as desired. If you have two grandkids, you can give them each up to $14,000 this year. (You can also make individual gifts through 529 education savings plans.) At this moment, every taxpayer can gift up to $5.49 million during his or her lifetime without triggering the federal estate and gift tax exemption.8

Be sure to give wisely, with input from a tax or financial professional, as 2017 ends.

Mike Moffitt may be reached at ph# 641-782-5577 or email: mikem@cfgiowa.com

Website: www.cfgiowa.com           

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Michael Moffitt is a Registered Representative with and Securities are offered through LPL Financial, Member FINRA/SIPC. Investments advice offered through Advantage Investment Management (AIM), a registered investment advisor. Cornerstone Financial Group and AIM are separate entities from LPL Financial.

Citations.

1 – tinyurl.com/y8dkleed [8/23/17]

2 – forbes.com/sites/kellyphillipserb/2017/10/19/irs-announces-2018-tax-brackets-standard-deduction-amounts-and-more/ [10/19/17]

3 – legalzoom.com/articles/cash-and-kickstarter-the-tax-implications-of-crowd-funding [3/17]

4 – irs.gov/retirement-plans/retirement-plans-faqs-regarding-iras-distributions-withdrawals [8/17/17]

5 – pe.com/2017/11/04/its-not-that-hard-to-give-cash-or-stock-to-charity/ [11/4/17]

6 – kiplinger.com/article/taxes/T021-C032-S014-gifting-a-life-insurance-policy-to-a-charity.html [11/17]

7 – foxbusiness.com/features/2017/10/18/edmunds-what-to-know-about-donating-your-car-to-charity.html [10/18/17]

8 – law.com/thelegalintelligencer/sites/thelegalintelligencer/2017/11/02/with-2018-fast-approaching-its-time-for-some-year-end-tax-planning-tips [11/2/17]

Now 64? Prepare to Sign up for Medicare.

This is the time to arrange lifelong health coverage. 

Age 64 is the age when you are reminded that you are a baby boomer growing older. Regardless of how young or old you feel at 64, you should make sure to sign up for Medicare.

The sign-up period will be here before you know it. In fact, you might already be within it, so act quickly if you are. Medicare gives you a 7-month window in which to enroll. That initial enrollment window opens three months prior to the month in which you turn 65 and closes three months after the month in which you turn 65.1

If you fail to enroll within that 7-month period, the chances are good that you will end up paying a late-enrollment penalty for not signing up for Part B coverage on time. That penalty is permanent. You will also have to wait until the next general enrollment period (January 1-March 31) to sign up.1,2

Are you already receiving Social Security retirement benefits? Have you received them for 24 straight months at any point? If your answer to either of those two questions is “yes,” then you will be enrolled in Medicare Part A and B, automatically. You will get your Medicare card in the mail about three months prior to turning 65.2

Are you currently covered under an employer or former employer’s health plan? If so, you may qualify for a special enrollment period. On the other hand, you may not.

The rules are complex here. If you are approaching your 65th birthday, your employer (or your health plan administrator) may require you to enroll in Medicare at the first opportunity. Not all companies demand this. If yours does not, then you can sign up for Medicare coverage later, without being hit with late-enrollment penalties.2

If you are still working at 65 and have employer-sponsored health coverage, you face no requirement to sign up for Medicare until you retire or that coverage disappears. (This also applies if you are retired, but your spouse has employer-sponsored health coverage.)2

The month after your employment ends or your employee health benefits linked to that employment end (whichever comes first), an 8-month enrollment period will open for you to enroll in Medicare.2

By the way, COBRA does not meet Medicare’s definition of employer-sponsored health insurance. Neither does a health plan sponsored by one of your past employers. You will be allowed no special enrollment period under these coverage circumstances.2

You will need to decide what types of coverage you prefer. Parts A and B are the basic parts of Medicare. (Sometimes they are simply referred to as “Original Medicare.”) Part A is hospital insurance, and Part B is medical insurance.

Most people pay nothing for Part A; effectively, they have prepaid for the coverage by paying Medicare taxes during years on the job. Every Medicare recipient pays a monthly Part B premium. At this writing, the Part B premium for most Medicare recipients is $134. Should you still be working, this may be all the coverage you need if your employer offers health benefits.1

You may want more coverage than Parts A and B provide. You might be interested in a Medicare Supplement Insurance (Medigap) policy or a Part D plan to help you pay for medicines. Or, you could sign up for a Part C (Medicare Advantage) plan, offering all basic Medicare benefits, plus prescription drug and medical coverage.3

Contact a Medicare specialist before you enroll. Even with its user-friendly website and plenty of online third-party guides to help those new to it, Medicare remains intricate; its nuances, hard to grasp. A financial or insurance professional well versed in Medicare enrollment, benefits, and regulations may make the process simpler for you.

Mike Moffitt may be reached at ph# 641-782-5577 or email: mikem@cfgiowa.com

Website: www.cfgiowa.com

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Michael Moffitt is a Registered Representative with and Securities are offered through LPL Financial, Member FINRA/SIPC. Investments advice offered through Advantage Investment Management (AIM), a registered investment advisor. Cornerstone Financial Group and AIM are separate entities from LPL Financial.

Citations.

1 – medicare.gov/people-like-me/new-to-medicare/getting-started-with-medicare.html [11/20/17]

2 – fool.com/retirement/general/2016/05/14/do-i-get-medicare-when-i-turn-65.aspx [5/14/17]

3 – kiplinger.com/slideshow/retirement/T039-S001-10-things-you-must-know-about-medicare/index.html [5/17]

 

Increasing Farm Efficiency During Challenging Times

It’s no secret that for many producers the past few years have been challenging. The days of $7 corn and $15 beans are more than five years in the rearview mirror and it takes a sharper pencil these days to be profitable and maintain a viable farming operation.

Farm efficiency can be obtained in many different ways. A good farm tax expert can be extremely valuable.  Some farmers focus on being better marketers.  Others key in on reducing costs of inputs and understanding government programs. Using new technologies can help an operator better understand how resources are being used.  Working with a banker to effectively manage capital is very important to other operators.

Few farmers, however, have the time or resources necessary to study all of the areas where efficiencies can be gained. But in these times of lower margins, it’s worth taking a look at areas you might have ignored over the past few years or strategies that you may need to take a second look at.

Technology

Ag technology has come a long way in the past five years, and in general is now more affordable to more producers. Seth Robinson of AgriVision Equipment Group (John Deere) in Winterset, Iowa, says their 3i service often more than pays for the cost of the program for many farmers.

“The 3i program divides your land into three zones from high producing to low producing land and we’ve seen situations where we can raise production in all zones because the data the system collects can allow decisions like planting rates and fertilizing rates to be made on a micro basis. We price 3i on a per bushel basis according to the number of services the farmer wants help with, so we are tied to the growing season and varying conditions, just like the grower.”

Granular is another digital ag solution that consists of products that help farms track their inputs, outputs, crop planning, financial forecasts, and workflow. Their Farm Management Software (FMS) helps farmers understand profitability by field by organizing the numerous data points on the farm.

Dakota Hoben, Customer Success Manager with Granular says, “We typically find farms that are 2,000 acres and above really value the product. But we can work with farms anywhere from 1,000 – 50,000 acres.”

The software is priced on a per acre basis for about $3 and includes software, customer success manager, and support.

In today’s world, time is money – especially during planting and harvest seasons. Applications using smartphones can reduce much of the time it takes to resolve issues. Apps like AgriSync allow farmers to connect with their local, trusted agribusiness consultants for help adopting and implementing new technologies.

Broad based technology has also entered the world of ag finance. Steven Johnson, Iowa State University Extension Farm Management Specialist, said in a recent farmer meeting to Farm Credit Services members in Red Oak, Iowa, that producers who are customers of Farm Credit Services should consider using their AgriPoint technology to move money between accounts, pay bills, wire money and make payments. AgriPoint also offers tools to create balance sheets, cash flows, what-if scenarios, and the ability to apply checks as payments on your desktop or mobile device.

Marketing

Although no one has a crystal ball when it comes to selling commodities, there are ways to certainly put the odds in your favor. Johnson of Iowa State University said understanding your localized historical basis information can add many cents per bushel to the average selling price of corn and beans when part of an overall marketing strategy.  He believes better days are ahead, demand for animal protein will increase demand for grain and current conditions could represent a trough of the 5-7 year cycle.

Tax Strategies

In 1935, United States Court of Appeals for the Second Circuit Judge Learned Hand said, “Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one’s taxes.” The U.S. tax code offers numerous opportunities for those in agriculture to use legal means to reduce their taxes. Karen Havens, a CPA in Greenfield, Iowa, who caters to farm clients, believes you can be creative while being ethical and legal.

“Farming has progressed to where business knowledge is essential, from choosing the right business structure to accurate records, tax planning, asset acquisition, cash flows and dealing with lenders. Farmers need to be aware of various tax strategies available to choose strategies that might benefit his particular circumstances, such as retirement funding, employees with employee health benefits, the Domestic Production Deduction, estate or succession planning, as well as other ideas.   Finding knowledgeable professionals to help navigate the maze of options is critical.”

Other strategies that can serve double-duty as both cost-reducers and tax-savers for specific situations include establishing your own captive insurance companies for property casualty coverage, creating conservation easements through land trusts to potentially generate both income tax credits and deductions, and for farmers close to retirement starting cash balance plans to create deductions, postpone taxes and fund retirement. These strategies are not new and not exclusive to agriculture but will most likely grow in popularity as some farmers get closer to retirement and the average farm operation continues to grow.

Government Programs

The United States Department of Agriculture (USDA), through its Farm Service Agency (FSA) division, offers many programs designed to aid farmers in becoming more efficient and potentially improve profitability. Producers are typically fairly well versed on the more popular FSA programs such as the Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC) programs that were authorized by the 2014 Farm Bill. Agriculture Loss Coverage-County (ARC-CO) provides revenue loss coverage at the county level. ARC-CO payments are issued when the actual county crop revenue of a covered commodity is less than the ARC-CO guarantee for the covered commodity.  Price Loss Coverage (PLC) program payments are issued when the effective price of a covered commodity is less than the respective reference price for that commodity. The effective price equals the higher of the market year average price (MYA) or the national average loan rate for the covered commodity.

Another popular FSA program is the Conservation Reserve Program (CRP). CRP is a land conservation program administered by FSA.  In exchange for a yearly rental payment, farmers enrolled in the program agree to remove environmentally sensitive land from agricultural production and plant species that will improve environmental health and quality.

Beyond that, there are other programs available that are less well known, such as Noninsured Crop Disaster Assistance Program (NAP), which provides financial assistance to producers of noninsurable crops when low yields, loss of inventory, or prevented planting occur due to natural disasters.

In addition, FSA has many different types of farms loans, such as Guaranteed Farm Loan Programs that help family farmers and ranchers obtain loans from USDA-approved commercial lenders at reasonable terms to buy farmland or finance agricultural production. There are beginning farmer loan programs, minority and women farmer loan programs and emergency farm loans.

Insurance

No one relishes the idea of purchasing insurance, yet there have never been more assets at risk in farming than there is today. Finding effective insurance strategies is a must, and finding efficient ways of paying for insurance is also critical.

“To be the most efficient with their coverage farmers really need to sit down with their agent on an annual basis and review coverage limits,” said Jamie Travis of Hometown Insurance in Creston, Iowa. “I advise my farmers to take risk where they can afford to and save premium.  Many times farmers do not have adequate coverage for their liability exposure.  Umbrellas are relatively inexpensive and they provide coverage in areas where farmers cannot afford to take risk.  If someone is injured or killed as a result of a farmer’s negligence, their responsibility to the injured party could be significantly more than their liability limit.  Adequate umbrella coverage can avoid being forced to sell assets in order to indemnify an injured party.”

In summary

According to futurist Jim Carroll (www.jimcarroll.com) estimates are that the world population will increase nearly 50 percent to almost 9 billion by 2050.  As a result, he predicts a great future for agriculture. To meet the demand, he predicts everyone in agriculture will need to be more efficient.  Producers will have to continue to focus on smarter, better, more efficient strategies in order to stay competitive and thrive.  To do that, they’ll need to seek out professionals in many disciplines to keep them up to date on trends and strategies that can help them stay efficient, improve their profitability and achieve their long-term goals.

Mike Moffitt is a Chartered Financial Consultant and founder of Cornerstone Financial Group with offices in West Des Moines, Iowa, and Creston, Iowa. Using his strategic partner network of professionals in accounting, legal and other key disciplines, he works closely with farmers and ag business owners on strategies that seek to help them grow their business and/or prepare for retirement. He can be reached at 641-782-5577.  Securities offered through LPL Financial, Member FINRA/SIPC.  Investment advice offered through Advantage Investment Management, a registered investment advisor.  Cornerstone Financial Group and Advantage Investment Management are separate entities from LPL Financial.  Other companies and their services mentioned in this article are not affiliated with LPL Financial and Cornerstone Financial Group.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.  There is no assurance that the techniques and strategies discussed are suitable for all individuals or will yield positive outcomes.

 

Examining the 2018 Social Security COLA

It will help retirees out, but it will not help them get ahead.

Seniors got a little good news this fall. Next year, monthly Social Security income payments to retirees will increase by 2.0%. That will mean an extra $326 – roughly $27.40 a month – for the average Social Security recipient in 2018.1

This is the largest cost-of-living adjustment (COLA) to Social Security benefits since 2012. In that year, retirees received 3.6% more in benefits than they had in 2011.2

Unfortunately, the 2.0% increase may not make much of a difference. After all, the COLA does not constitute a gain on inflation, but merely a response to it.

The Senior Citizens League, an advocacy group for retirees, thinks that rising Medicare premiums could absorb the 2.0% COLA for 70% of Social Security beneficiaries. Whether that happens or not, some analysts think retirees deserve larger Social Security COLAs than the ones they receive.2

The COLAs have constantly fallen short of rising housing costs and medical costs. In fact, yearly health care inflation exceeded annual Social Security COLAs in 33 of the 35 years ending in 2016.3

Should the method for figuring the annual COLA be changed? Perhaps it should be, as other metrics can be used.

When the federal government figures out annual COLAs for Social Security, it references the annualized advance in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). Critics argue that the CPI-W is the wrong benchmark. They feel COLAs should be calculated using the Consumer Price Index for the Elderly (CPI-E). The CPI-E only tracks spending for households headed by those aged 62 or older.3

Back in 2011, the Bureau of Labor Statistics scrutinized both the CPI-W and CPI-E. It determined that the CPI-E gave greater weight to rent and mortgage expenses and health care costs, but slightly less weight to education, food, entertainment, clothing, and transportation expenses. The CPI-E may, therefore, be a better measure of senior expenses – and if it is ever used as a yardstick to measure Social Security COLAs, those COLAs might be larger.3

Given all this, why does the federal government keep using the CPI-W to figure out COLAs? The CPI-E, it turns out, has flaws of its own. It does not include any Medicare Part A expenses, and the larger COLAs it would potentially generate for retirees would also help to speed the drawdown of Social Security’s coffers.3

A 2.0% raise may not be much, but it beats what happened in 2016 and 2017. The 2017 COLA was only 0.3%, and retirees went without any COLA the year before.2

Mike Moffitt may be reached at ph# 641-782-5577 or email: mikem@cfgiowa.com

Website: www.cfgiowa.com

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.       

Michael Moffitt is a Registered Representative with and Securities are offered through LPL Financial, Member FINRA/SIPC. Investments advice offered through Advantage Investment Management (AIM), a registered investment advisor. Cornerstone Financial Group and AIM are separate entities from LPL Financial.

Citations.

1 – marketwatch.com/story/social-security-checks-expected-to-increase-2-in-2018-2017-10-13/ [10/13/17]

2 – cnbc.com/2017/10/13/medicare-premiums-may-devour-increased-2018-social-security-benefit.html [10/13/17]

3 – fool.com/retirement/2017/08/05/social-security-benefits-are-expected-to-increase.aspx [8/5/17]