You may want to reconsider your retirement portfolio before the fiscal cliff — a package of steep tax hikes and spending cuts — automatically takes effect at year's end.
Fiscal cliff tax strategies
"Now's the time to prepare your personal finances for the worst," says Andrea Coombes at MarketWatch. Unless Congress acts, the economy risks going off the "fiscal cliff" at year's end, so retirement savers should consider some year-end tax strategies to protect their nest eggs just in case. Since income-tax rates could rise next year, consider converting your traditional IRA to a Roth. "You'll pay income tax on the amount converted, but once that money is in a Roth, your earnings grow tax-free." The end of the payroll tax cut could also make saving tougher. "Start studying your spending habits to assess how you can ramp up retirement contributions next year even as your paycheck shrinks." Finally, with some tax deductions on the chopping block, consider pushing some eligible write-offs into 2013 because they "will be more valuable when rates are higher."
A 401(k) that never runs dry
"One large company has overhauled its 401(k) plan so workers can receive a paycheck for life," says Tara Siegel Bernard in The New York Times. Aerospace giant United Technologies offers its nearly 200,000 employees a unique retirement plan that aims to protect "hard-earned savings from a volatile stock market" and guarantee that employees' savings will never run out. The plan invests in target-date mutual funds that become more conservative as workers age, and gradually shifts employees' savings "into variable annuities that guarantee a minimum level of income for life." Experts say the plan — one of the first by a large company to include annuities — could be a model for others. "They are breaking new ground," said Dallas Salisbury of the Employee Benefit Retirement Institute.
When Medicare won't pay
Seniors who have their Medicare claims denied have "surprisingly good" odds on appeal, says Mark Miller at Reuters. In 2010, 40 percent of Part A hospitalization appeals and 53 percent of Part B outpatient appeals were granted, according to the Centers for Medicare & Medicaid Services. Consumer advocates say the process is straightforward. Simply indicate on your summary notice of coverage what you think has been erroneously denied, make a copy, and mail it back. It pays to be persistent. "If your appeal is denied at the first level, keep going. You have the right to three additional levels of appeal, and the odds get better as you move along."
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