AARP Applauds House Introduction of Automatic IRA Bill

/PRNewswire/ -- AARP Executive Vice President Nancy LeaMond offered the following statement in reaction to U.S. Representative Neal's introduction of the Automatic IRA Act of 2010. The bill would provide millions of Americans the opportunity to automatically save for retirement in the workplace:

"AARP is pleased to see momentum building around helping Americans save for retirement. Representative Neal and his colleagues who cosponsored the bill - Representatives Schwartz, Blumenauer and Stark - are to be commended for their leadership on this very important issue.

"To date, both chambers of Congress have introduced legislation that would expand access to retirement savings in the workplace, giving approximately 42 million more workers an opportunity to build their own nest egg.

"The Automatic IRA proposal is a simple, low-cost and common-sense solution to the problem that too few Americans are saving for their retirement. If enacted, this legislation would give tens of millions of employees a new saving option at work through regular, automatic payroll deductions. Studies show that contributions to 401(k) accounts rise dramatically when individuals can contribute to them automatically. The proposal gives employees the choice to opt out of the savings plan, but the goal is to make saving as simple and streamlined as possible for those who wish to do so.

"AARP looks forward to working with Representative Neal to build bipartisan support for this common-sense legislation and make it easier for Americans to save for their own retirement."

-----
Community News You Can Use
www.fayettefrontpage.com
Fayette Front Page
www.georgiafrontpage.com
Georgia Front Page
Follow us on Twitter:  @GAFrontPage

Upcoming Tax Season Provides Unique Tax Savings Opportunities through Roth IRA Conversions

/PRNewswire/ -- A change in the federal tax law, effective January 1, 2010, will permit Roth IRA conversions for taxpayers at all income levels. In the past, this option was only available to those with an adjusted gross income of $100,000 or less.

"Taxpayers may now convert part, or all of their assets from a traditional IRA into a tax free Roth IRA," says Kevin McCormack, President of Pension Parameters Financial Services.

"While many individuals and businesses are carefully scrutinizing their budgets, creating a Roth and taking advantage of a unique opportunity this year and next, and in some cases, even borrowing money to cover an investment like a conversion today, can pay off."

Details related to the change include:
-- Any portion of a traditional IRA may be converted
-- Conversion to a Roth IRA in 2010 allows for a 50-50 income tax split
for the 2011 and 2012 tax years - and the split is only applicable if
you convert in 2010
-- Though account balances have decreased in the past 18 months, the
upside is that reduced balances will lower conversion tax and yield
the potential to recover in a tax-free account
-- With tax rates at an historical low, converting to a Roth IRA in 2010
may help protect retirement assets should tax rates rise


Pension Parameters has been helping self-employed individuals and small business owners with retirement plan development and investment management since the 1970s. The company is known for its customized retirement plans and extensive follow-up with clients. McCormack states, "Unlike many pension plan managers, we do not simply collect monies and set up the plan and invest. When we see market changes, our market manager personally calls each client to recommend the right move to make."

According to McCormack, those establishing their first company retirement plans are often confused about their options such as a 401(k) plan, which allow owners and employees to make contributions through pre-tax payroll deductions, or a defined benefit plan, which may allow a business owner to make the highest possible annual contribution to his or her retirement account. Pension Parameters lately has been recommending new comparability plans, a profit-sharing option that allows certain businesses to make discretionary contributions to a qualified plan.

A Roth IRA ultimately saves tax dollars as well. Since you have already paid the tax upfront when establishing the account, the need to pay tax later is eliminated. The money you make in a Roth IRA will all be yours (or your heirs) in the end, not the government's.

Pension Parameters Financial Services is a New York and New Jersey based full service 401(k) plan provider including investment advisory and management services for the small business market. For more information regarding Pension Parameters or Roth IRA savings opportunities call: 212-675-9360 or visit them on the web at http://www.pensionfinancialservices.com/.

-----
www.fayettefrontpage.com
Fayette Front Page
www.georgiafrontpage.com
Georgia Front Page

A Dozen New Items to Consider When Filing Your 2008 Return

/PRNewswire/ -- First Quarter, 2009 - While the process of filing your return each year is pretty much the same, it will be important to watch the details and consider new options when rounding up your statements of income, figuring out your standard or itemized deductions, subtracting your credits, and making your choices on payment. According to William E. Massey, Senior Tax Analyst for the Tax & Accounting business of Thomson Reuters, "If you just ease into the same routine when doing your 2008 taxes, you may miss out on big tax savings that could result from a number of key changes that first apply for the 2008 tax year."

To help you take advantage of the new tax saving opportunities, he has put together this list of a dozen key items to consider when filing the form 1040 for 2008:

1. Economic stimulus payment. You may have received an economic stimulus payment in 2008, based on your 2007 taxes. If so, don't include it as income on your return. It's not taxable. If you didn't receive a payment, you may be eligible for the recovery rebate credit, as explained below. You may even qualify for that credit if you did receive an economic stimulus payment.

2. Recovery rebate credit. This credit is figured like last year's economic stimulus payment, except that the amounts are based on tax year 2008 instead of tax year 2007. The maximum credit is $600 ($1,200 if married filing jointly) plus $300 for each qualifying child. You may be able to take this credit only if you did not get an economic stimulus payment, or your economic stimulus payment was less than $600 ($1,200 if married filing jointly for 2007) plus $300 for each qualifying child you had for 2008.

Massey notes, "Many individuals may have received a zero or reduced economic stimulus payment because of the phase out rules. Under those rules, the amount of an economic stimulus payment (both the basic and the child's amount) was reduced by 5% of a taxpayer's adjusted gross income (AGI) above $75,000 ($150,000 for joint returns). Since the time when IRS first started sending out economic stimulus payments, economic conditions have drastically worsened. As a result, many individuals who lost all or a portion of their economic stimulus payment because of the phase out rules may now be in a position to claim a recovery rebate credit on the 2008 return they file in 2009. This would be relevant to a taxpayer who, for example, experienced a job layoff, cutback in hours or reduction of salary. A recovery rebate credit may also be allowed on account of a child being born in 2008 or to someone first entering the workforce in 2008."

3. Withdrawal of economic stimulus payment from certain accounts. You may have opted to have your economic stimulus payment directly deposited to a tax-favored account, such as an IRA, and you now realize you need the money. Don't worry about being penalized for taking the payment back. If you withdraw it by the due date of your return (including extensions), the amount withdrawn will not be taxed and no additional tax or penalty will apply. For stimulus payments deposited into a Coverdell education savings account (CESA), the withdrawal can be made by the later of the above date or May 31, 2009.

4. Alternative minimum tax (AMT) exemption amount increased. For 2007, you may have owed AMT or come close to owing it. That's the added tax that arises when your income is refigured in a special way to tax you on certain items that aren't taxed under the regular rules and to deny certain deductions that are allowed under the regular rules. Some individuals may not be hit with the tax for 2008 because the AMT exemption has increased to $46,200 ($69,950 if married filing jointly or a surviving spouse; $34,975 if married filing separately).

5. Standard deduction increased by real estate taxes. Suppose you own a home and pay real estate taxes but don't have enough total deductions to be able to itemize. There is good news for you. You can increase your standard deduction by the state and local real estates taxes you paid, up to $500 ($1,000 if married filing jointly).

6. Standard deduction increased by net disaster loss. There have been many natural disasters in 2008. If you were one of the unfortunate individuals who was victimized by a hurricane, flood, fire or other natural disaster last year, there is some new tax help for you. You can increase your standard deduction by your net disaster loss. This amount is your personal casualty losses from a federally declared disaster in a disaster area less any personal casualty gains from it.

7. First-time homebuyer credit. There's a new credit for "first-time" homebuyers. Actually, that term is misleading because, as we demonstrate below, you may qualify even if you previously owned a home. Qualified homebuyers can subtract the credit amount from their federal income tax when they buy the home and even get a refund if the credit exceeds the tax. However, they are then required to pay the credit back over 15 years. The result is that the credit resembles an interest-free loan that must be repaid to the government. Here are the details:

-- The home must be located in the U.S. and must be your principal
residence (main home). You (and if married, your spouse) must not have
owned another principal residence in the U.S. in the three-year period
before purchasing the new home. Thus, the home doesn't literally have
to be your first home.
-- The home must have been purchased from April 9, 2008 through June 30,
2009, inclusive.
-- A special rule allows taxpayers who purchase a principal residence in
the first six months of 2009 to treat the purchase as if made on
December 31, 2008. This allows the taxpayer to claim the credit for
2008 rather than 2009.
-- The credit is equal to 10% of the price paid for the home, up to a
maximum of $7,500. The $7,500 maximum credit applies both to
individuals and married couples filing a joint return. A married
individual filing separately can claim a maximum credit of $3,750.
-- The credit is phased out for individual taxpayers with modified
adjusted gross income (AGI) between $75,000 and $95,000 ($150,000 and
$170,000 for joint filers) for the year of purchase. Taxpayers with
modified AGI over $95,000 ($170,000 for joint filers) can't claim the
credit.
-- In the second year after purchase, taxpayers who took the credit must
start paying back the credit in equal installments over 15 years, with
no interest charge.
-- No credit is allowed if: the taxpayer or the taxpayer's spouse was
ever entitled to a D.C. homebuyer credit; the home purchase was
financed through tax-exempt mortgage revenue bonds; the taxpayer is a
nonresident alien; or the taxpayer disposes of the residence (or it
ceases to be a principal residence) in the year of purchase.



8. Rollovers to Roth IRAs. Subject to conditions, you can roll over distributions from an eligible retirement plan to a Roth IRA. The rollover is not tax-free. But with lowered account values, the tax may not be onerous. Also, you may be able to use other available tax breaks to eliminate or reduce the tax arising from the rollover. "You may be thinking, why would I want to do something that causes me to pay tax? You would do this to gain the advantages of a Roth IRA," says Massey.

9. Standard mileage rates. The 2008 rate for business use of one's vehicle is 50 1/2 cents a mile (58 1/2 cents a mile after June 30, 2008). The 2008 rate for use of one's vehicle to get medical care or to move is 19 cents a mile (27 cents a mile after June 30, 2008).

10. Personal exemption and itemized deduction phaseouts reduced. Taxpayers with adjusted gross income above a certain amount may lose part of their deduction for personal exemptions and certain itemized deductions. The amount by which these deductions are reduced in 2008 is only 1/2 of the amount of the reduction that otherwise would have applied in 2007.

11. Tax rate on qualified dividends and net capital gain reduced. The 5% tax rate on qualified dividends and net capital gain that applied for 2007 is reduced to zero for 2008.

12. Tax on child's investment income. Form 8615 is required to figure the tax for a child with investment income of more than $1,800 if the child: (1) was under age 18 at the end of 2008; (2) was age 18 at the end of 2008 and did not have earned income that was more than half of the child's support; or (3) was a full-time student over age 18 and under age 24 at the end of 2008 and did not have earned income that was more than half of the child's support.

-----
www.fayettefrontpage.com
Fayette Front Page
www.georgiafrontpage.com
Georgia Front Page

U.S. Labor Department finalizes rule on investment advice for 401(k) plans and IRAs

/PRNewswire-USNewswire/ -- The U.S. Department of Labor today announced publication of a final rule to make investment advice more accessible for millions of Americans in 401(k) type plans and individual retirement accounts (IRAs). The final rule will be published in the Jan. 21, 2009, edition of the Federal Register. The rule includes a regulation that implements the new statutory exemption for investment advice added to the Employee Retirement Income Security Act (ERISA) by the Pension Protection Act (PPA) and a related class exemption.

"Access to professional investment advice is particularly important now for workers as they manage their 401(k) plans and IRAs in changing and volatile financial markets," said Secretary of Labor Elaine L. Chao.

The final rule provides general guidance on the exemption's requirements, including computer model certification and disclosures by fiduciaries. The regulation also includes a model form to assist advisers in satisfying the exemption's fee disclosure requirement. In addition, the final rule includes a class exemption expanding the availability of investment advice.

The PPA amended ERISA by adding a new prohibited transaction exemption that allows greater flexibility for participants of 401(k) plans and IRAs to obtain investment advice. One of the ways in which investment advice may be given under the exemption is through the use of a computer model certified as unbiased. The other way is through an adviser compensated on a "level-fee" basis. Several other requirements also must be satisfied, including disclosure of fees the adviser is to receive.

"Millions of American workers are responsible for managing their 401(k) and IRA accounts. The department took extraordinary steps to engage a broad spectrum of participants, employers, plan fiduciaries and others throughout the rulemaking process," said Bradford P. Campbell, assistant secretary of the Labor Department's Employee Benefits Security Administration. "The final rule expands access to investment advice without compromising the critical protections for plan participants and beneficiaries."

-----
www.fayettefrontpage.com
Fayette Front Page
www.georgiafrontpage.com
Georgia Front Page

Financial Planner’s Advice: Don’t Tap Your Retirement Account!

(BUSINESS WIRE)--Don’t make a costly mistake with your retirement money in today’s turbulent financial markets, says Sarasota financial planner Phil Couture.

“Do everything you can to avoid making withdrawals from your retirement accounts to meet immediate cash needs, and take steps to safeguard your long-term investments,” said Couture, CFP, president, Couture Financial, Inc., www.couturefinancial.com. “Otherwise, you put your financial future in serious jeopardy.”

Taking money from an Individual Retirement Account (IRA) or employer’s 401(k) plan can also have serious tax consequences. For instance, the Internal Revenue Service (IRS) typically imposes a 10 percent penalty, in addition to the deferred income tax, on funds withdrawn from a retirement account before age 59.5.

As a Certified Financial Planner who has helped thousands of clients since 1977, Couture has several suggestions for protecting your retirement funds:

• Diversify your investments. Don’t put everything into “safe” investments like certificates of deposit (CDs) or other fixed-income investments that do not keep up with inflation. Keep some stocks, real estate and other assets in your portfolio to preserve future purchasing power.

• Don’t take out a loan from your IRA or 401k plan. That’s tempting when faced with overdue mortgage payments or other immediate debts. But any loan from an IRA must be paid back in full in 60 days. If you have a loan from your 401k and you lose your job, it must be paid back immediately. Otherwise IRS considers the loan as taxable income.

• Be sure your IRA accounts held at a bank are insured. The Federal Deposit Insurance Corporation (FDIC) currently covers up to $250,000 in retirement accounts at any one bank, but any additional funds are at risk. If necessary, move some of those dollars to an insured account at another bank.

• Don’t let your bank or other plan custodian give you a credit card or checking account tied to your retirement funds. You could wind up withdrawing excessive amounts, and those funds will count as taxable personal income.

• Be very careful when transferring or “rolling over” your IRA funds to avoid tax penalties. The IRS will only allow you to move the funds “in a rollover transaction” from one custodian to another just once in any 12-month period.

“Remember that retirement accounts are meant for long-term investments,” said Couture. “Keep that perspective and sleep better at night.”

-----
www.fayettefrontpage.com
Fayette Front Page
www.georgiafrontpage.com
Georgia Front Page