Self-employment taxes: Federal tax obligations

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The self-employed, such as sole proprietors, owners of part-time businesses, partners, and independent contractors, have certain federal tax obligations to fulfill. Generally, self-employed individuals must pay self-employment taxes and income taxes.

Self-employment (SE) taxes

SE tax rates are divided into two parts: Medicare and Social Security. The current rates are 2.9 percent for Medicare and 12.4 percent for Social Security. This means that net earnings are subject to a tax rate of 15.3 percent.

The Social Security part of SE taxes applies to net earnings in excess of $400 up to $113, 700. Earnings above the maximum will not be subject to the 12.4 percent tax. The Additional Medicare Tax went into effect in 2013 as part of the Affordable Care Act. Those whose earnings reach a certain threshold amount are required to pay an additional 0.9 percent Medicare tax. The threshold amounts depend on the individual's filing status. For example, the single filing status has a threshold amount of $200,000.

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Who needs to pay SE taxes?

• Self-employed individuals who had net earnings of $400 or more are required to pay SE taxes and file a Schedule SE (Form 1040.)

• Church workers with a net income of $108.28 or more.

• Ministers, members of religious orders, and Christian Science practitioners must pay SE taxes on their salaries, wages, and other income generated from the services they perform.

• U.S. citizens, with the exception of dual citizens, who are employed by foreign governments or international organizations must pay SE taxes for income generated from services performed in the United States, the Commonwealth of the North Mariana Islands, Guam, Puerto Rico, American Samoa, or the U.S. Virgin islands.

• U.S. citizens living outside of the country must pay SE taxes, unless they are working in a country with a Social Security agreement, in which case they only need to pay taxes in the country they're living in. Countries with these agreements currently include Australia, Canada, the U.K., France, and Germany. • Non-resident aliens from a country with a Social Security agreement.

• Debtors in Chapter 11 bankruptcy cases.

Estimating taxes and preparing tax returns can be confusing and time-consuming. For many people, hiring a tax professional such as a certified public accountant helps greatly in ensuring that their tax obligations are met and opportunities for tax benefits are researched and taken advantage of.

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REPOST: Repatriation Holiday: It’s Time To Drop It For Good

This article by Alexandra Thornton of the Center for American Progress clarifies the impact of a repatriation holiday 10 years from now.

 

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The U.S. government taxes the worldwide income of U.S. multinational corporations, but profits earned overseas are not actually subject to tax until a company repatriates them or brings them home. To avoid double taxation when “deferred” earnings are repatriated and taxed, companies receive a credit for any foreign taxes already paid on them. For obvious reasons, multinationals have a strong incentive to keep their profits offshore for as long as possible, and they very creatively use tax-law loopholes to avoid repatriation and taxation.

How exactly do they do this? Basically, multinationals use a variety of business transactions and accounting schemes that enable them to take advantage of loopholes in the laws that govern the taxation of U.S. companies’ foreign-sourced income. These tactics have the effect of shifting income to foreign countries—preferably to low-tax countries. Sometimes the U.S. company actually merges with a foreign company—perhaps even with its own subsidiary—and moves its headquarters out of the United States. This is referred to as a corporate “inversion.” Most of these tactics are accomplished on the books—through accounting transactions or stock purchases, for example—and may not actually involve people, products, or machinery moving across borders. While there may be nontax reasons for some of these profit-shifting activities, they are often simply a paper transaction made in an attempt to avoid U.S. taxation.

From 2009 to 2013, the corporate tax represented only 6.6 percent to 9.9 percent of total federal tax receipts. The ability of multinational corporations to defer U.S. taxes on their foreign earnings is a big reason why corporate tax receipts are so low.

Repatriation holiday proposal

Recently, an idea has resurfaced to allow multinationals a “repatriation holiday.” This idea, which was last carried out in 2004, gives multinationals a short window of time to bring home their foreign earnings at an extremely low tax rate.

Proponents say that a repatriation holiday would let everybody win: The federal government would get a big chunk of tax revenue and the foreign earnings would come home, where they would increase domestic investment and employment. Proponents also argue that there are huge amounts of deferred foreign earnings “trapped” overseas and that U.S. multinationals cannot afford to bring them home because the United States has the highest corporate tax rate in the world.

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According to a Joint Committee on Taxation, or JCT, estimate, however, a repatriation holiday would cost the U.S. government $36.7 billion in lost tax revenue over five years and $95.8 billion over 10 years. The projections were made at the request of Sen. Orrin Hatch (R-UT), who asked the JCT to estimate the revenue impact of a re-enactment of Internal Revenue Code Section 965, the 2004 repatriation holiday. While JCT found that the provision raised revenue in the first two years, it said this would be followed by eight years of substantial revenue losses. This is in part because a significant portion of the foreign profits repatriated during a short holiday period consists of profits that eventually would have been repatriated anyway. This means they would have been taxed at normal corporate rates. In addition, research strongly suggests that allowing a second repatriation holiday will lead taxpayers to delay repatriation of earnings after the holiday window closes in anticipation of yet another holiday in a future year.

Furthermore, the last repatriation holiday was not followed by a significant increase in domestic investment among the corporations that took advantage of it. On these grounds, therefore, the proposal’s revenue loss clearly is not worth it.

Deferred earnings of U.S. multinationals not “trapped” overseas

Companies can use deferred profits to accomplish their business goals in the United States without repatriating and paying taxes on them. The funds that are supposedly sitting in foreign accounts can be—and often are—deposited in U.S. bank accounts. The company that owns them cannot spend them directly on itself, but it can invest them in U.S. Treasury bonds or in other U.S. corporations without being required to pay taxes on them. In addition, U.S. banks will gladly make loans to a U.S. company with large deferred earnings accounts because they know the company can repatriate the funds later, if necessary, to pay off the loans. In this manner, the company can effectively access its foreign earnings for any purpose in the United States without paying tax on them until later.

According to the White House and the Department of the Treasury, when all types of taxes and tax-related factors are taken into account, the effective tax rate on U.S. corporations is in line with that of our major competitors. While it’s true that the U.S. statutory corporate tax rate of 35 percent is the highest among countries in the Organisation for Economic Co-operation and Development, there are many factors that affect what taxes corporations actually pay and what impact the taxes have on those corporations’ investment incentives. Depending on how these factors are incorporated into a more comprehensive measure, the effective tax rate on U.S. corporations will be somewhat above or below the average, but it will not be way out of line.

Isidor Hefter is a certified public accountant who specializes in tax-related accounts. To learn more about taxation and revenue, follow this Twitter account.

Five tax deductions for landlords

For many rental property owners, tax deductions can mean the difference between making and losing money. Fortunately, landlords can take advantage of federal tax deductions in the form of the following:

1. Loan interest

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 Loan interest is generally the single largest expense that rental property owners have to pay. Landlords can deduct interest on mortgages for the rental property, interest on credit cards, and interest on personal loans used to maintain or improve the rental property.

2. Repairs

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 Landlords spend a lot of money each year in repairs: the costs of re-painting walls, replacing broken tiles, or fixing leaky water heaters, and other similar activities qualify for this type of tax deduction. As long as the repairs don’t extend the life of the property or add material value to the property, the rental property owner can write them off.

3. Local and long distance travel expenses

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 Landlords can deduct travel expenses as long as the trips were made in connection to the property, for example, showing prospective tenants around the property. For local travel, landlords can apply for a tax deduction every time they drive to the property. Landlords can deduct the cost of fuel, car repairs, and maintenance. Long-distance travel expenses typically include transportation costs, lodging, and meals.

4. Legal and professional fees

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 If a landlord hires a lawyer, accountant, real estate agent, or some other professional for assistance in running his business, the fees that the landlord pays are deductible.

5. Casualty losses

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The loss or damage of a property due to an unexpected, sudden, and unusual event like earthquakes, hurricanes, and floods is tax-deductible. The amount that could be written off depends on the amount of damage undergone by the property and the coverage of the landlord's insurance.

Before attempting to claim any tax deductions, in case of an audit, landlords must keep permanent records of tenant leases, legal documents, permits, and property titles, and short-term records, like lists of repairs, advertising costs, and wages paid.  

Isidor Hefter is a certified public accountant specializing in tax planning and research for corporations and individuals with high net worth. For more tax-related articles, subscribe to this blog.

REPOST: Supreme court agrees to hear landmark case on whether states may tax income earned in other states

Does a state violate the U.S. Constitution if it collects income taxes from its residents when the income was earned from another state?  This Forbes article provides some answers.
 

The Supreme Court had a busy day on Tuesday. When the dust settled, however, it had only granted one new case – but it was a big one. The nation’s highest court granted certiorari to Comptroller v. Wynne, setting the stage for a fight that could rewrite tax laws in states across the country.

As noted before, lawyers and judges like to use Latin. Granting certiorari (or “granting cert” for the really cool hipster lawyers) means that the Supreme Court will hear the matter.


Some cases have what’s called “original jurisdiction” in the Supreme Court; those cases, which are defined by statute (28 U.S.C. § 1251) go straight to the Supreme Court. The typical case associated with original jurisdiction would be a dispute between the states. Most cases, however, don’t go that route. To be heard at the Supreme Court level without having original jurisdiction requires the losing party at the appellate level to file a petition seeking a review of the case. If the Supreme Court grants the petition and decides to hear the matter, it’s called a writ of certiorari. And that’s what happened here.

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The question presented in the Petition for Certiorari in Wynne (downloads as a pdf) is:

Does the United States Constitution prohibit a state from taxing all the income of its residents — wherever earned — by mandating a credit for taxes paid on income earned in other states?

Procedurally, the question found its way to the Supreme Court after the Court of Appeals of Maryland “reached the unprecedented conclusion” that a state is in violation of the Commerce Clause in the U.S. Constitution if it collects income taxes from its residents when the income was earned from sources in another state and is subject to tax by the other state.


In this case, a married couple, the Wynnes, reported taxable net income of approximately $2.7 million. More than half of that amount represented a share of earnings in an S corporation with operations in several states. The Wynnes claimed a credit on their Maryland tax returns for taxes paid to 39 other states but not for any county or local government taxes. The State of Maryland denied the credits and issued a notice of deficiency and the Wynnes appealed. At a hearing, the assessment was affirmed.


Eventually, the Wynnes amended their petition to claim that the tax credit statute was in violation of the Commerce Clause of the United State Constitution. That claim was rejected. At appeal, the Wynnes argued that the state of Maryland was constitutionally required to extend the credit for taxes paid to other states to the county as well as the state, raising the question of whether a state had the unconditional right to tax all income based on residency. The Circuit Court agreed with the Wynnes.


On appeal by the state, the Court of Appeals agreed with the Circuit Court. The Court wrote that, based on its belief that the Constitution prohibits “double taxation” of income earned in interstate commerce, a state may not tax all the income of its residents, wherever earned.


That decision, it was argued by the state, conflicted with a number of “fundamental precepts” involving the “well-established principle” that “a jurisdiction… may tax all the income of its residents, even income earned outside the taxing jurisdiction.” However, in Wynne, the Court of Appeals concluded that the Commerce Clause imposes restrictions on a state’s power to tax its own residents: in other words, Maryland was not allowed to tax all of its residents’ income if the resident paid taxes on that income to another State.

The state argued that this finding was inconsistent with prior law and was, in a word, wrong. The consequences, according to the state’s petition, could be the “significant loss of revenue that will amount to tens of millions of dollars annually.”


And that’s why you should care. Not only does this decision have consequences for Maryland but it “has potential repercussions beyond Maryland,” according to the petitioner (downloads as a pdf). The reply brief for the petitioner specifically notes that “while most states provide full credits for income taxes paid to other states, many local jurisdictions do not.” The result, if the Wynne decision holds, according to the state is that “any jurisdiction taxing its residents’ entire income will face needless uncertainty about the viability of its tax system and its potential exposure to onerous refund claims.”


In other words, an affirmation could cost local and state governments millions of dollars.

The loss shouldn’t matter, according to Dominic Perella, a lawyer with Hogan Lovells who is representing the Wynnes. He said, about the case: “Maryland’s approach is unfair to people who make money in more than one state.”

The question is big enough for the feds to weigh in. The Obama administration issued an amicus curiae brief in April of this year, supporting the petitioner’s position (downloads as a pdf). Amicus curiae is Latin (yes, more Latin) for “friend of the court” and describes an argument made by someone who is not a specific party to the proceedings but believes that the court’s decision may affect its interest. Under the Rules of the Supreme Court of the U.S., “An amicus curiae brief that brings to the attention of the Court relevant matter not already brought to its attention by the parties may be of considerable help to the Court. An amicus curiae brief that does not serve this purpose burdens the Court, and its filing is not favored.”


The feds argued in their brief that “though States often choose to grant tax credits to their residents for income taxes paid in other States, nothing in the Commerce Clause compels a State to offer such credits or otherwise defer to other States in the taxation of its own residents’ income.” Further, “[t]he decision… may lead to challenges to similar tax schemes in other jurisdictions; and is inconsistent with statements made by the highest courts in other States.”


The U.S. Supreme Court clearly agreed that this was a matter that needed to be resolved. Granting cert doesn’t mean that the court believes that the petitioner is correct: the regular court rules apply. There will be arguments and more (!) briefs before the Court reaches a decision.
These matters do not move quickly: you shouldn’t expect oral arguments on this matter until fall of this year. But expect plenty of speculation – and interest – before then.

Isidor Hefter is an expert in federal and state income taxes.  Follow this Twitter page for more updates about taxation.

REPOST: Last Minute Tax Tips For First Time Filers

This Forbes.com article shares that tax time is learning time. Continue reading to find out why.

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Being a kid has many perks. You get summer vacations, superhero costumes are acceptable garb for most occasions and a firm belief that you’re destined to live in the White House is adorable. Plus, you don’t have to file taxes–or, if you do, your parents curse the “kiddie tax” and complete the forms for you. A 1985 New Yorker cartoon sums up the jealousy adults feel about this fact well, “Remember, son, these are your tax-free years. Make the most of them.”

But now, you’re gainfully employed –which is a good thing–and ready to undertake an adult rite of passage: filing your tax return at the last minute. (Ask your parents to tell you about the lines at the US Postal Service before the advent of online filing.) Sure, you could get an automatic six month extension by filing form 4868. But you’d still have to fill out that form and pay all you owe by April 15. The IRS takes deadlines very seriously–or at least those it imposes on taxpayers, if not itself. Moreover, if you’re an employee who has taxes withheld from your paycheck, you’re likely to be getting a refund anyway. So really, there’s no reason not to tackle your 1040 now.

Paying taxes is not fun, but if you’re prepared filing can be painless and even free.

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Software

Free, you say? In 2003, eager to head off free tax preparation by the Internal Revenue Service, a group of for-profit tax software companies,operating as the Free File Alliance, agreed to provide free filing for low and moderate income taxpayers. Each of the 14 alliance companies sets its own eligibility criteria, but anyone with 2013 adjusted gross income of $58,000 or less will be able to find at least one free federal filing options.

The IRS vets the software for security and privacy standards and offers a handy Help Me Find Free File Software tool, which uses your age, estimated adjusted gross income and home state to recommend the best software for you. There are also yes or no questions about your earned income tax credit eligibility (if you’re childless, you can’t claim this credit if you earned more than $14,340 in 2013 or were younger than 25 at the end of the year) and whether you or your spouse received military pay last year. When determining what software is right for you, keep in mind that some will prepare select state returns for free as well, while others will hit you up with a charge for state filing that can run to $40 or more.

The tax software market is dominated by Intuit’s TurboTax program, with H&R Block software a distant second. Both companies offer easy to use programs with a fair amount of explanation and produced identical results when I tested them (which, of course, they should). Free options will cover the average 20-something wage-earner’s tax filing needs. The sites can even import W-2 information for you, although it may be worth entering the information manually at least once so you understand what is on there and just how much is withheld from your paycheck. (A W-2 reports your annual wages and the amount already withheld to pay federal and state income, Social Security and Medicare taxes. Your employer sends the IRS a copy and the IRS computer matches the information on it against your 1040, so if the numbers on your W-2 are wrong, ask immediately for a corrected form. Ditto for any 1099s you’ve gotten reporting interest or miscellaneous income.)

For all the talk of “free filing,” if you’re self-employed or do a little freelancing and have to file Schedule C, you’ll likely have to shell out for a paid version of the software—-up to $99.99 list (but you can get it for $79.99 on Amazon) for the TurboTax Home & Business version. If you’re an investor, check out the offers from your broker or mutual fund company; Vanguard and Fidelity, among others, offer discounted access to TurboTax. The other catch is that both TurboTax and H&R Block charge extra to electronically prepare and file your state returns. (Insult to injury department: TurboTax also upped its prices for filing after March 21.)

A cheaper option is the third largest player in the market, TaxAct, which offers free federal filing no matter what forms you must fill out or what you earn. It charges just $17.99 for an “ultimate” version with state filing included.

As your return gets more complicated however—say you’re self-employed and pay other independent contractors or Grandma left you some shares in partnerships that generate indecipherable Schedule Ks—you may want to consider upgrading to human advice. “I would caution people,” says Clarence Kehoe, head of the tax department at accounting firm Anchin Block & Anchin, “under the old garbage in, garbage out scenario – the information you get out of that computer is going to be as good as the information you put in. You have to be careful.”

Hiring a pro can run into hundreds of dollars. “Most people who are starting out really can’t justify going to a tax preparer,” says Margaret Starner, a financial advisor with Raymond James. But for people who feel they need guidance beyond what software (or their parents) can provide she recommends going to a preparer one year, and then, after seeing how a pro does it, using that example to do it yourself. “You should understand every line on your return,’’ Starner says. (Or at least have a good enough idea that if you enter something wrong in TurboTax you’ll be able to notice when it spits errors.)

Be careful whom you hire—here are 11 questions to ask when hiring a tax preparer. Ultimately your tax return is your legal responsibility and neither “my tax pro was a dishonest idiot” or “the software didn’t ask me” is a valid excuse for excluding income or grabbing deductions and credits you’re not entitled to. (You really don’t want to mess with the IRS; you could waste the best years of your life on hold waiting to plead your case with a human being at the IRS and if you let problems fester you could be hit with tax liens that sink your credit scores for years.) On the flip side, if you don’t know what you’re doing or skip sections in the software you could miss out on a bigger refund. The IRS won’t mind, but your bank account might.

For more read Kelly Phillips Erbs’, “A Beginner’s Guide To Taxes: Do I Need To Hire A Tax Preparer Or Can I Do My Return Myself?”

Getting Organized

But we are getting a bit ahead of ourselves. Kehoe points out,  “Planning for your taxes is a yearlong event, not something you do on April 14th.”Adding, “Maybe this is just me because after a little while you lose your memory, but it’s very very hard to remember what you did on January 1^st a year and a half later.” 

Read more.

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More about tax planning and guides can be found on this Isidor Hefter blog site.

REPOST: A Surprising Number of Americans Think Cheating on Taxes Is ‘A-OK’

According to a recent survey, 12% of Americans say it's okay to cheat on taxes. Read more in this Time.com article.

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Cheating on your taxes by fudging the numbers “a little here and there” or “as much as possible” is totally OK with 12% of Americans, according to a survey of 1,000 people from the Internal Revenue Service Oversight Board.

That number is up from a low of 9% in 2008 and a slight increase over the 11% who felt cheating was OK in 2012, CNN Money reports.

That trend is matched by an increase in the numbers of Americans who have a bad opinion of the IRS. A record low of 39% said the tax agency “maintains a proper balance between its enforcement and service programs.”


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REPOST: Planning For An Uncertain Life Expectancy In Retirement

This Forbes.com discusses the importance of setting realistic goals in retirement.

When figuring out how much to save for retirement or how to withdraw assets during retirement, one of the thorniest issues is not knowing how long the individual is going to live. Living longer than expected, which is often referred to as longevity risk, can increase the likelihood of other risks occurring, driving up certain retirement expenditures such as long-term care costs. For those moving into retirement, this is particularly tricky because part of the planning must include a way to secure an adequate stream of income for an unpredictable length of time. For example, let’s say that you build your retirement plan expecting to live to age 82. However, it turns out that you live to 92. How are you going to make your money last an additional 10 years?

The uncertainty of an individual’s lifespan cannot be eliminated. However, planning to have sufficient assets requires setting realistic expectations of how long retirement will last. According to the Social Security Commission, the average life expectancy for those still alive at age 65 is 84 for males and 86 for females. Planning, however, needs to take into consideration living longer than average, or half of retirees could run out of money before they die. So another consideration is the possibility of living longer than average. The data shows that one in four people alive at age 65 will live past age 90 and one in ten will live past 95.

To help identify the average life expectancy for a stated age and gender, the Social Security Administration provides a life expectancy calculator. The calculator indicates that a 60 year old male born in 1953 has an average life expectancy of 83.4 years. If that same person lives to age 66, life expectancy extends to 84.6. Furthermore, if he lives to age 70, his life expectancy extends to age 86. This demonstrates a critical point about life expectancy—the longer you live, the longer your life expectancy. This means that as people age they need to alter their expectations about the length of their life and retirement.

Estimating life expectancy may begin with a table or calculator, but the next step must take into consideration personal and family health history. One online calculator, the living to 100 Calculator, takes these personal factors into consideration when creating a life expectancy estimate. By entering information about your current health, lifestyle habits, and family’s health history, the calculator is able to create a more accurate personal life expectancy estimate.

Solutions for an Uncertain Lifespan

Since planning requires making educated choices about an uncertain retirement period, many will want to plan to age 90, as one in four people are expected to live that long. However, fewer may want to plan for living past age 95, as only one in ten people are expected to live that long. Those with a greater concern about outliving their assets will choose a longer planning horizon. As such, an individual’s perceived life expectancy and risk aversion will impact his or her retirement planning decisions.

One common strategy for all types of risk management is to transfer the risk to a third party. Transferring the risk of living too long can be accomplished by increasing or acquiring sources of lifetime income. This can be accomplished through a variety of mechanisms:

Deferring Social Security benefits, which are an inflation protected lifetime income stream, up to age 70 results in a larger portion of one’s retirement income that will be payable for life.

Electing life annuity payments from an employer sponsored retirement plan will provide lifetime income. Unfortunately, most employees who have the option to take a lump sum make this election, forgoing the annuity alternatives.

Purchasing a life annuity can create a stream of income for either the life of a single individual or over the joint lives of a couple. Immediate annuities can be purchased at retirement or layered over time adding flexibility.

Purchasing a deferred income annuity (a life annuity that begins at a later date) allows for the pre-purchase of lifetime income for those that want to build retirement income prior to retirement or want to buy an annuity that begins later in life, which can be a cost effective way to protect against longevity risk.

Deferred annuities can also be used to create income for life, as these can be annuitized at a later date, allowing the owner to lock in lifetime income. Deferred annuities can be purchased with riders that provide for lifetime withdrawals at a rate specified in the contract. Lifetime income is also available through life insurance contracts. When a death benefit becomes due, a spouse can choose a life annuity form of payment. Also, cash value life insurance contracts can be exchanged under code section 1035 without tax consequences for a life annuity. While increasing sources of lifetime income is one strategy to protect against longevity risk, there are other options when planning for an uncertain retirement time period. As such, some sources of income are payable for an indefinite period of time, which can provide some protection from longevity risk without specifically having to set aside the assets for the sole purpose of lifetime income.

With reverse mortgages under the Home Equity Conversion Mortgage program (HECM) one of the withdrawal options is the tenure option. This is a specified monthly payment for as long as the last borrower remains in the home.

Rental income can provide a lifetime income stream and serve other purposes as well. That could be renting out a basement apartment, vacation home, or commercial property.

Dividend paying stock has no time limit on the payment of dividends and can provide lifetime income, potential investment gains, and company ownership rights.

Those with active business interests can also receive ongoing payments. This can be anything from owning part or all of a company to receiving royalties from books, television shows, or other property interests.

For retirees who fund their living expenses with withdrawals from their portfolio, it is important to carefully consider how much can be withdrawn each year while still ensuring the portfolio lasts a lifetime. This is a difficult decision that should involve consideration of academic research, professional assistance, an individual’s goals and risk tolerance, and changes in market conditions over time.

Another option is the use of a contingency fund, which can be built to address longevity concerns as well as other risks. With this approach, it is important to understand that when individuals live longer they increase exposure to other risks as well, such as inflation risk, public policy risk, and the risks associated with aging, such as the need for long-term care and increased medical expenses. Accordingly, a contingency fund should be part, but not all of the solution.

• A contingency fund for this risk can be a diversified portfolio with investments that emphasize long-term growth.
• A Roth IRA makes a good tax wrapper for this type of account since the value is not diminished by taxes, and if the funds are not needed, the Roth is a very tax efficient vehicle to leave funds to heirs.
• A contingency fund could also be the cash value of a life insurance policy—i.e., the goal may be to provide the death benefit for heirs, but if needed the cash value can be withdrawn or borrowed from the policy.
• A reverse mortgage with a line of credit payout option is another good contingency plan.

Ultimately, the uncertain length of retirement and longevity risk make planning for retirement extremely difficult because the retiree must have income to meet an uncertain amount of expenditures over an uncertain time period. While this risk cannot be completely eliminated, it can be planned for and managed through a variety of techniques, financial products, and planning strategies.

Isidor Hefter holds a Bachelor’s degree in accountancy, which he completed at the City College of New York. More updates in the world of finance can be found by visiting this Facebook page.