Thinking about retiring soon? If so, you’ll want to review any laws that will affect your retirement plan. Many laws have been introduced in recent years that affect seniors and their ability to retire. These laws can have positive or negative effects on people who are planning to retire soon.
There are new taxes, healthcare laws, and other legislation that directly affects those who are getting ready to leave the workforce and no longer pay income taxes. Here is a brief overview of some of the most significant laws affecting seniors as they get ready to retire.
Healthcare Laws
The first significant law affecting seniors in recent years is related to healthcare. The Affordable Care Act (ACA), or Obamacare, introduced new rules for health insurance starting in 2014. Retirees over 65 are affected by these healthcare laws in several ways. First, the ACA modified Medicare in several ways.
One of the most significant changes for seniors is the “donut hole” in Medicare Part D coverage. The donut hole refers to a gap in Medicare coverage. If you have Medicare Part D coverage, you are responsible for paying for drugs up to a certain amount. After that amount, you get no coverage from Medicare until the donut hole is closed.
In 2019, the donut hole was closed. Seniors enrolled in Medicare Part D will get coverage for the difference—in some cases, up to $3000. This rule applies to all Medicare Part D plans, including government plans. Another important change implemented by the ACA is the “essential health benefits” rule.
This rule requires all health insurance policies to cover a minimum level of services. While all healthcare policies must cover these essential benefits, Medicare policies must also cover a few extra benefits, including prescription drugs. Retirees over 65 should also be aware of Medicare supplement insurance.
Medicare supplement insurance, also known as Medigap, helps cover the “donut hole” in Medicare Part D coverage. Before Obamacare, Medigap policies were relatively inexpensive.
Now, however, many Medigap policies are more expensive and have more restrictions. Seniors should check the current Medigap policy marketplace to decide which policies are best for them.
Taxes That Affect Retirees
The most significant law affecting retirees is likely the Tax Cuts and Jobs Act (TCJA). The TCJA, which went into effect in 2018, is a major tax reform that affects retirees in several ways.
It introduces several new taxes on high-income earners that didn’t exist before. Retirees who are making high incomes but are not working are likely to be affected by these new taxes.
The first new tax affecting retirees is the “surtax” on high-income earners. This surtax is a significant addition to the normal income tax and applies to people who make more than $200,000 per year as a single tax filer or $400,000 per year as a joint filer. This tax is not levied on investment income.
Instead, it applies to earn income such as wages. Retirees who are still earning a significant amount of money but are no longer paying taxes on that income due to retirement should be aware of this surtax. Another new tax affecting high-income retirees is the net investment income tax.
This tax applies to investment income such as dividends, interest, and capital gains. It does not apply to earned income such as wages. Seniors who are still generating significant investment income either from retirement accounts or from investments may be affected by this new tax.
Financial Regulations for Seniors
The Truth in Savings Act and the Financial Literacy Improvement Act have both been in effect since 2019.
These financial regulations affect seniors who might be dealing with their finances. The Truth in Savings Act requires all financial institutions to clearly disclose all applicable fees. The law also requires any savings or checking accounts that guarantee a certain amount of interest to clearly disclose the amount of interest guaranteed.
Seniors who are dealing with money but may not be comfortable with financial terms may want to check these disclosures on their accounts. The Financial Literacy Improvement Act requires banks and credit unions to offer financial literacy education to all customers.
This law also requires financial institutions to provide information on fraud prevention. Seniors who are worried about financial fraud, identity theft, and other common scams may be able to benefit from these provisions of the Financial Literacy Improvement Act.
Government Benefits for Seniors
The last significant law that affects seniors is related to government benefits. The Bipartisan Budget Act of 2018 introduced new rules for collecting Social Security and other government benefits.
Seniors who are collecting government benefits such as Social Security should be aware of these changes. The most significant change implemented by the BBA is a delay in the increase in the Social Security full retirement age.
The full retirement age is the age at which you can start collecting the maximum amount of Social Security without incurring a penalty. The full retirement age was scheduled to increase from 66 to 67 from 2022 to 2029.
Moreover, the BBA delayed this increase by two years, so the full retirement age will remain 66 for people born between 1943 and 1954.Seniors who are aged 54 or younger should be aware of this change in timing.
Other Laws Seniors Should Know About
The Affordable Retirement Advice Act, enacted in 2018, requires financial advisors to prove that their advice is in the best interest of their clients. The law also requires advisors to disclose any potential conflicts of interest.
Seniors who are considering getting financial advice should be aware of these rules. The Retirement Security and Savings Act of 2018 was also enacted 2018. This law protects private-sector employees from being forced into government-run retirement plans. Seniors who work for large private sector companies may want to be aware of this law.
The Health Savings Account Expansion Act, which was also enacted in 2018, allows people to contribute more money to health savings accounts. Seniors who are concerned about health care costs in retirement may want to consider health savings accounts as a way to save money.
Promotion for Seniors: Free Checking and Credit Monitoring
Retirees should be aware of laws that govern their retirement. At the same time, retirees should also be aware of any scams that target seniors. One way to stay safe as a senior is to use a free checking account.
Seniors can find out if they qualify for a free checking account from their current bank or a new bank that offers free checking with no minimum balance. They should also be aware of scams that target them. Seniors are often targeted because they have more disposable income and more assets than younger generations.
Scammers may use the threat of arrest or other legal charges to trick seniors into paying for supposed debts. Seniors can use free credit monitoring to stay safe from these scams. Remember that these laws are new and can change at any time. Seniors should be aware of these laws and understand how they affect their ability to retire.
Conclusion
Retirement laws affect how much retirees can earn and how they can spend their money. Retirees may be able to earn more money while they have retired, thanks to laws that allow them to work longer.
Retirees can also earn more money thanks to rising interest rates. Seniors who are nearing retirement should be aware of the laws that affect their ability to retire and what benefits are available to them. Seniors should understand any new laws so that they can take full advantage of benefits that could make their retirement more secure.
