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Great News For Retirees

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On this episode of the Retire Once Show, Johnathan and Melissa discuss how the Inflation Reduction Act can impact your retirement. For many retirees, the Inflation Reduction Act can save them money in retirement. They discuss whether or not the market will be impacted by the new law. They also help answer a question from a listener who is going back to work after retirement and is wondering how her Social Security Benefits will be impacted. Most people don’t realize that you can reverse your Social Security decision, but beware, there are important factors to consider.

If you have questions you would like answered , submit questions to the show at Retire@theoremwm.com

Hello, and welcome to the retire wants show the show designed to help you get to retirement, but most importantly, stay retired. I'm your Johnathan Rankin. I'm the founder and CEO of Theorem wealth management. And I am joined as always by my lovely co-host. Hi, I'm Melissa Rankin. Thank you for joining us.Thank you for being here. And, uh, today our episode is about some really good news for those people who are retired. We've got some great news for you today that we're gonna. But before we jump into that, make sure you hit that subscribe button. Cuz as you know, as we've been talking about, we're building this retirement community, right?Mel, join us, come join us, come join us. Hit that subscribe button, whether you're on YouTube or you're listening to this on any platform, just hit that subscribe button. So you're notified every time that, uh, that net episode comes out. So Mel, what good news do we have for retirees? Let's. Let's start there.So we've got some good news that we want to share. So we've got some information about the inflation reduction act. That's right. And, uh, This actually came to us in the form of a question that someone submitted. And so if you have a question you can head to retire once show.com uh, ask us any question that you'd like, we'd be happy to address that here on the show.And, uh, and you can also, you want to, you can schedule some time to connect with us on an individual basis where we can run a free retirement consultation for you, but, uh, Yeah, so let's go into, uh, what do we get on? So let's just jump right in. So the question we got was from Brian and he said, I'm retired.How does the inflation reduction act affect me? Which I think is what everybody wants to know the top question for most retirees. Yeah, I think, well, anytime that any legislation really passes. I think most people always wonder, okay, how does this actually impact me? What does it mean for me? Yeah. You know what?What's in it for me. Um, now the inflation reduction act, if you're not aware it was passed last week on the 16th and really addressed two things, climate change and Medicare. Now we're not a political show. Don't care if you're left right center don't care. Yeah. We're not going to get into whether or not this bill should have been passed or shouldn't have, or.Ever you wanted to put in there for your benefit. We're not gonna talk about that. But we are happy to hear your opinions on it again. So you're welcome to yes. To send us any feedback that you have. Absolutely. Definitely. We're open to that. Absolutely. But today we're gonna talk about how it really does impact anybody.Who's retired like Brian here. So really, uh, for retirees it, it's gonna focus on two different aspects, Medicare, and then does this, or how does this. Your investments, and those are the questions that we've been getting. So, you know, the first thing we'll dive into is Medicare. And obviously we know healthcare costs have, you know, continued to rise in out pace inflation for a long period of time.And it's been one of the biggest risks to retirees and so unknown. I mean, it's, it is. And not knowing, you know, every year, obviously the older you get, you know, the more that you're gonna need healthcare is what the studies have shown. And I mean, that's. Your body starts to break down. Of course. You're like, I'm trying be, I'm trying to be positive for our listeners.I'm sorry that, oh, I'm sorry. I'm the realistic one. I know, please. But if you're watching this, I don't want you to think that, you know, I think that your body is deteriorating.  that's only my watch. No, I don't either. I just think that people, you know, should be prepared for that. Yeah. This is. The title of this episode is great news for retirees.great news. Your body's deteriorating by Melissa Rankin. So anyway, okay. Back to the topic at hand back to the topic at hand. So the first thing that came out of this inflation reduction act is Medicare will now be able to negotiate drug prices. Now, this is a very big deal because currently prescriptions that count for 20%.Of Medicare patients out of pocket expenses. So it's a, it's outrageous, very large cost. And so, uh, now don't get your hopes up. This isn't starting until 20, 26. So past it this year, guess we get to wait a couple years, uh, but this will hopefully reduce the very expensive medication over time. So they're actually going to start with, uh, the top 10 most expense.List is still to be determined, but they're going to try and reduce those costs down. So hang on, let get this straight. We've got, so we've got the, the top 10, top 10, but it's not happening for over four, four more years. Three and a half, three. Oh, okay. Just wanna make sure a little less than three and half those backs.All, all straight. Yeah. So, uh, you got a little bit of time, uh, with your deteriorat health  I was gonna say to eventually save money on medication that you're gonna. Uplifting show Mel uplift. God. We are really hit that subscribe button when you have time, uh, retirement paradise. That's what we're building here.So, um, the next part about it is that there's now going to be a $2,000 cap on out of pocket expenses for prescription drugs. So that's actually a good, that's a, that's a positive thing. This is a positive thing. Bright, cheerier that this is a, this is very good news. You don't have to wait until 2026 for this one.You just have to wait until 20, 25. Oh. So they give it to you. Oh, good. A year earlier, a year earlier, like I said, we're not left or right. This isn't talking about whether the bill should run past, I guess they're just making people wait a little bit for some, uh, for some savings. Um, the next part of it is insulin price limit.So starting next year. So you don't have to wait that long, only a couple months. Uh, the cost for a monthly supply for insulin will be capped at $35. That's a big deal. That one actually is that's a very big deal. It's a really big deal because there, I saw a study that from 2007 to 2020, the cost that, uh, Medicare part D and rollies were paying for insulin went from like 230 plus million to over, you know, $1 billion.Over that, you know, 13, 14 year timeframe. So, whereas during that time, Medicare enrolls who actually need insulin doubled. So right now they're about 3.3 million people that need insulin. So they're, you know, they're gonna dramatically benefit from this. So, and that's the one that's starting next year, next year.Yep. Starting next year. And then, uh, the last part of it, that's really going to benefit. Uh, retirees is free vaccines. Now, not just, we're not talking about the flu or COVID, but really, uh, all vaccines are going, going to be free. Uh, sometimes it can cost hundreds of dollars. They're not always free right now.So that also starts in 2023, uh, as Melissa would say to stop the deteriorating health . God  we are having a great time here. We are so happy that you're here. At least we're laughing about it. At least we're laughing about it. If you can't laugh, it's just that that's true. However, she's talking about deteriorating health and we have great news retire.I'm talking about why medical expenses are so high when you retire. That is true. Deteriorating health  but great news for retirees. You're gonna save money on that deteriorating health. So starting next year, starting next year, and then really 10 parts, 20, 25. And then again, maybe in 2026. So they didn't add anything for 20, 24.Uh, I, I don't believe so. Oh, that's well, I, no, no, they, they left that year out. Interesting. Very interesting. So, um, next we'll talk about the impact on investments. Now we get this question a lot. Anytime there's any major legislation is okay, how is this going to affect the market? Is the market gonna go up or down because of this?Now this bill had two major tax provisions that are really helping offset the cost of this program. And good thing is they don't apply to us as individuals. They apply to corporations. So, uh, there's going to be a 15% minimum tax on corpor. That have more of a billion dollars of book income per year. So the estimated impact is this is going to impact about 150 companies, uh, a little less than half of those are in growth sectors, like tech, consumer discretionary or communication services.And then about a third are in healthcare. Now did read a report from JP Morgan that said, Uh, those sectors might feel earnings per share headwinds of about one to 2%. So just something to be aware of as you're building out your allocation. And then the second part is a 1% tax on stock buybacks. So I know stock buybacks have been a really big thing over the past couple years.I know a lot of people wonder, okay, why are companies buying back their stock? Well, they're doing so in an effort to, you know, return money to shareholders, uh, increase shareholder value. That is now going to have a 1% tax on it. And so, um, we might see companies either pull those buybacks into this year to avoid that 1% tax or eventually shift that into more of a dividend, uh, as opposed to a shared buyback.Okay. So how often do companies? I don't know. Do this, or what do they account for, with the buybacks? What's the, so what we, I mean last year was a huge year. We saw almost a trillion dollars of stock buybacks. I think it was something like 880 billion. Oh wow. That companies in the S P 500 spent on buying their stock back.And so now they'll have that tax on it. Now that exactly they'll have 1% tax. So, uh, right now, you know, one of the top companies that is, uh, notorious for doing stock buybacks is apple. You know, it'll be interesting to see what their strategy is with whether or not they increase their dividend or how they go about, uh, you know, paying this 1% tax.I mean, if you're apple does the 1% tax matter, but with the amount they're doing, probably, probably. So, um, it'll be interesting to see what companies do moving forward, but, uh, you know, this is one where stock buybacks have been heavily criticized, uh, over the past couple years because you know, a lot of conversation has been.Okay. Has this really been the driver of the performance in the market? You know, if companies are just buying their own stock back, is that why the market went up so much? And then you saw companies in, you know, right. As the pandemic hit that were needing money from the government that were a couple years ago buying their own stock back.And so it's, uh, I think like a borrowing from one side to pay the other kind of exactly. So there's, there's been a lot of scrutiny on this. And so there's no surprise that we saw something that's built to do that. You know, I don't think it's going to mean that the stock market's going to crash or that it's going to, you know, double in value because of this bill.It's essentially how the, the first part of the bill is going to be paid for. Exactly. So it doesn't really affect. Individuals, which is kind of nice. Yep. So Apple's buyback might be paying for your deteriorating health is what Mel's trying to say. So great news for retirees. You're gonna be saving money on, uh, on Medicare prescriptions at some point, um, in the future.So, but nothing in 2024, nothing in 2024. So it's probably because it's an election year. Ah, but again, we're not political here. Not at all. This is not, you know, she's not CNN, I'm not Fox. , I'm not Fox. She's not CNN. This is not the way we do things. We're not a house divided. We're just here to bring you all the new information.that's it. That's what we're here to do. So we did get another question that came in. So I want you share the second question we got. So Joyce asked a question. She said I retired last year, but due to inflation concerns, I decided to go back to. Understandable. The problem is she started social security on January 1st and she wants to know how that's going to be impacted by her going back to work.Yeah, this is, this has been really common over the past year where, you know, especially after the pandemic, that kind of forced a lot of people to go into early retirement. Now, starting to think about, you know, reentering the workforce as things gotten more expensive. So a couple things to unpack here. So the first thing we're gonna talk about.Taxation on social security benefits. Uh, we get this question a lot, you know, how much do I, can I earn without my social security benefits being taxed in this situation, Joyce is going back to work. So, um, to determine how much your social security is taxed. There's a formula known as buckle, lot people.Oh yeah. This is gonna be a ride. Great news for retirees. We got numbers coming at you. Make sure you hit that subscribe button, deteriorating health and numbers.  so, uh, there's a formula called the provisional income, also known as a combined income. Now this is taking half of your social security benefit.Your adjusted gross income and any non-taxable interests. So really any income from wages, interest dividends, or other taxable income kind of fit into that bucket. So let's assume that Joyce's benefit is $24,000 a year. So $2,000 a month, and she's going back to work. She's gonna make $50,000. Okay. That's the only income she has.So in this scenario, Half that 24 is 12. So $12,000. Plus the 50, her new combined income is $62,000 for social security taxation purposes. Now there are two really thresholds that you have to be aware of the 50% threshold and the 85% threshold. So individuals with combined income between buckle up here, we got numbers coming at you individuals with combined income between 25,030 4,000.We'll pay income tax on up to 50% of their social security benefits. Now couples it's 32,000 to 44,000. So if you, if Joyce is married, she didn't really provide that here in the question, but she's married, you know, 32,000 to 44,000 to get in that 50% bucket. Uh, and then individuals with combined income more than 34,000 or couples over 44,000.May pay taxes on up to 85% of their social security benefit. Okay. Now that we've, uh, wrapped up the math portion of our episode  yes. ABC 1 23. So yes. So what are the rules though? I mean, there's gotta be a little bit more to it than just the, the taxes, right? So taxes. Well that's yeah, so that is that's her first option.She, you just go to work and she can Essent. Add that money to her combined income and, you know, pay taxes on whatever applicable tax she's owed or she's due on whatever that income is. So that's option one, the other one, because she retired or started taking benefits in January of this year. She can actually reverse that social security.So this is something that not many people are aware of. There are really two options. If you want to, uh, you know, really reverse your social security decision, but there are very specific rules and deadlines to be aware of. So naturally, uh, yeah, social security, they don't make anything easy as you imagine.Um, so the first thing you could do is you can reverse the decision within the first 12 months of claiming social.  so Joyce started taking benefits January 1st. She has until January 1st of next year, I would do a December 31st just to be safe, just, just me, just because give it a day. Um, but you can cancel your application and essentially you with you do, what's called a withdrawal.Now you are only allowed one withdrawal per lifetime, so whew. They limit you. I don't know. Keeping track of, you know, one thing per lifetime, I dunno. That's uh, so you get one of these per lifetime. Uh, you can withdraw this, but the one caveat you have to be aware of now, this is the important part. When you withdraw your application, you have to repay all the benefits that you've received and anybody who's received benefits on your behalf also has to have those repaid.So if you have a spouse or a child claiming benefits on your. Then Joyce you'd have to pay back your benefit and that benefit that they received as well. There's the catch. That's the catch that's right there. And then there's more, oh, of course. There's more, but wait, there's more, it's like, we're on a, uh, what is that?The home shopping network, but wait, there's more for only  any, any time a, a, a host says, but only wait. There's more, you know, first you know that you shouldn't buy whatever you're buying  whatever's on the screen. Don't buy, just shut the TV off. You shut the TV off if they say, but wait, there's more, uh, But wait here, there's more, uh, you, so you must repay all those social security benefits and you must repay any money that was paid, uh, that from those benefits that was used to pay Medicare premiums or any federal income tax withholding.So, uh, you've gotta pay all back. And what this means is it means that you reverse the whole decision. It's like you never claimed before. So this can really be impactful depending on how old Joyce is. Let's assume she's 62 years old. If she's 62, you know, she took a pretty big hit to her social security benefit by claiming it early.If she's going back to work, you know, let's say that, uh, now she does the withdrawal, pays everything back, and now she's able to claim that benefit at full retirement. As you get a hundred percent of her benefit. Or even better delay till 70 and get, you know, really the, the full max that you can get by getting those delayed, uh, those delayed credits.So, so I guess the, the moral of that one is just really try to be sure  yeah. Do you wanna make sure that you are, are sure with what you're doing and that, that is the other thing is that, um, you know, there is another caveat. Let's just say that Joyce is 65. Other things she wants to be sure about if you're 65 Joyces and you are on Medicare and you decide that you want to withdraw your application, you have to clearly state.Now there's a form. I believe it's the, uh, I looked it up, of course, there's a form, very specific form, social, the SSA dash 5 21. So, you know, they make things fun over there at the social security administration form 5 21. Uh, you have to elect whether or not you want to keep your Medicare benefits or. Now, if you decide that you wanna keep your Medicare benefit.You have to pay the premiums directly. So just know that you've gotta pay those directly as opposed to any other format, it just, but you have to elect and make it very clear that you want to keep, uh, and stay on Medicare. Okay. So let's say, let's say Joyce is a rebel. What if she just doesn't wanna pay it back.Okay. Or what if she's like, oh gosh, I forgot so much happened over this year. I forgot the, the 12 month window or, or like I said, I, I don't know. I I'm hoping she's a rebel and just doesn't wanna pay it back then. What, there, there could be that well, okay. So Joyce, if you're a rebel or you just decide, you kind of forgot until January 2nd, you're like, oops.Oh, then, uh, Depending on your age. So if you're over full retirement age, so if you reach full retirement age, but you're not seven years old, then what you can do is you can actually suspend your benefit. And this will allow you to earn delayed retirement credits for every single month that you suspend.And, uh, the caveat here is that anybody receiving benefits on your behalf also has to suspend as well. Now benefits will restart, uh, either at age 70 or whenever you elect for them to. But it is important to know that you have to have reached for retirement age and not be 70 years old yet. So there's kind of that sweet spot, uh, that window there, that depending on your age, shouldn't provide that.So going forward, if you'd like to provide us with a question, you could be as vague as Joyce here, which we appreciate, or you can. Be as detailed as you'd like, and we can be more specific. The vague is good too, because it gives us a chance to, that's true to throw more numbers at you, which is always a good thing that is true numbers and surveys.Those are what we're known for here on retirement period stats for yeah. And deteriorating health. So, um, yeah. So Joyce, just summarize, you've got a number of choices. Uh, you can work and keep taking social security and you're just gonna owe some taxes on it based on how much you're gonna. Uh, you can withdraw and pay it back depending on your age, or you can possibly suspend it.If you know, you're at full retirement age or not. So couple different choices there. If you do have questions, let's say, uh, you really want to go through your individual circumstances. Uh, you can head to retire once show.com schedule some time with us. We'll link to that as well in the show notes. Um, but that is our show for today.Some good news along with Melissa's, you know, Uh, happiness of deteriorating health. Thank you for that. By realistic view,  spin it. However you want.  our listeners are now going. Wow. They're just, all they're doing is insulting me, telling me I have deteriorating health.  so well, not everybody. I apologize on her behalf.but, uh, that is our show for today. I am Jonathan ranking. Thank you so much for joining us. I'm Melissa Rankin. Thank you.‍

Registered Representative of Sanctuary Securities Inc. and Investment Advisor Representative of Sanctuary Advisors, LLC.– Securities offered through Sanctuary Securities, Inc., Member FINRA, SIPC. –  Advisory services offered through Sanctuary Advisors, LLC., an SEC Registered Investment Advisor. – Theorem Wealth Management is a DBA of Sanctuary Securities, Inc. and Sanctuary Advisors, LLC. This communication has not been reviewed for completeness or accuracy, does not necessarily reflect the views of Sanctuary Securities, Inc. or Sanctuary Advisors, LLC., and is not a recommendation or endorsement of any product, service, or issuer. Third party posts do not reflect the views of Theorem Wealth Management or Sanctuary Securities, Inc. or Sanctuary Advisors, LLC., and have not been reviewed for completeness and accuracy. All further communications from this representative must be sent from and received by johnathan@theoremwm.com. For additional information, please refer to one of the following consumer websites: www.FINRA.org, www.SIPC.org.

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