Tax Benefits and Team Update

Will Congress pass tax and budget plans? Democratic Party leaders seek to pass a roughly $1 trillion infrastructure bill and a $3.5 trillion spending plan focused on health care, education, family support and climate change initiatives. To help pay for these ambitious programs, a series of tax hikes are on the table. According to the economists we follow, what will likely be agreed upon is less spending and lower tax increases. Whatever the ultimate outcome is, just know that your team at ZRC Wealth is watching this closely and will contact all clients who we believe will be impacted by such changes with advice and guidance specific to their personal financial situation.

Benefit Enrollment Season: As open-enrollment season approaches, you may be looking for a Health Savings Account (HSA). HSAs come with high-deductible healthcare plans (a plan with a deductible of at least $1,400 for individuals or $2,800 for families). HSAs offer tremendous tax benefits: Money enters tax-free, grows tax-free, and can be withdrawn tax-free if spent on qualified medical expenses. Individuals that use their HSA dollars on current healthcare expenses benefit because HSA contributions are excluded from income taxes (and sometimes Medicare and Social Security taxes as well). For an individual account, you can contribute up to $3,600 in 2021 ($7,200 for families), plus an additional $1,000 in catch-up contributions if you’re 55 or older. In 2022, the annual contribution will increase to $3,650 for self-only coverage and $7,300 for families with no change to the catch-up contribution.

There are many health savings accounts to choose from. Charles Schwab offers one through Optum Bank we are still evaluating. Others that ourselves and clients have had good experiences with include Health Savings and HSA Bank. In client review meetings, we discuss if you could benefit from a health saving account (once you go on Medicare you are no longer eligible to contribute to an HSA).

Social Security benefits to jump 5.9% in 2022, the biggest increase in 40 years. Next year’s COLA will be the highest it’s been since 1982, when it was 7.4%. For more than a decade, these adjustments have averaged less than 2%. The increase is still modest as the average Social Security benefit is around $1,543 a month. A 6% increase would equate to roughly $93 or $1,111 extra over a full year – a help to older Americans on a fixed income, but perhaps not equal to the high expenses associated with healthcare and housing. In clients’ financial plans, we assess the benefit of taking Social Security at different ages.

ZRC Team Member Updates
In June, Kelly & Pat Gillette’s son Jayden graduated with honors from Cardinal Newman High School in Santa Rosa. In August, he started at Colorado State University in Fort Collins and plans to study psychology and business. With a similar community feel as Sonoma County, Jayden has quickly adjusted to college life, attending football games and exploring the bounty of nature Colorado has to offer. Kelly and Pat are slowly adjusting to life as empty nesters.

Kevin enjoyed the storybook wedding of his first child and only daughter a few weeks ago. The weather could not have been better for the ceremony that was held outdoors at Farmstead in St. Helena. The newlyweds are settling into their new home in La Jolla.