On the edge: how seniors are teetering on fiscal cliff

Published: Wednesday, Nov. 21 2012 10:40 a.m. MST

Shirley Petersen poses for a portrait at the Utah Conference for Seniors in Salt Lake City earlier this year. Seniors are standing on the edge of the upcoming fiscal cliff, according to a report.

Ravell Call, Deseret News

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Seniors are standing on the edge of the upcoming fiscal cliff, according to U.S. News.

While decisions in legislation will determine how much this affects individuals, here are six ways that it can affect seniors in particular, according to the U.S. News article.

Increased dividend taxes

Income received from stock and mutual fund investments are taxed at 15 percent currently, but if we go over the fiscal cliff, they will be taxed at ordinary income rates, which will reach up to 40 percent.

Increased taxes on capital gains

For investments held longer than a year, which are long-term capital gains, the tax rate will increase from 15 to 20 percent.

Social Security

Actually, the fiscal cliff could bring somewhat good news for Social Security. The benefit would not get higher, but the 2 percent payroll tax break that was established in 2010 would end. The payroll tax funds Social Security, so that tax could repair some damages that happened in the program funding.

Medicare cutbacks

There would be $11 billion cut out of Medicare, which would lower the payments made to doctors. Patients may potentially have to pay the difference. Because of this, doctors could also limit the number of Medicare patients they would see.

Value of homes

Mortgage rates are a big guessing game. It's unlikely for home prices to rebound with less government spending, less employment and less after-tax income. It could cause home values to drop again.

Investment value

If the economy suffers after going over the fiscal cliff, then investment returns would be lower. When that happens, lower returns are taxed at a higher rate. This could cause high-dividend stocks, defense stocks and banking stocks to take big losses.

EMAIL: alovell@deseretnews.com

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