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Retirement Planning New Year's Resolutions

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Michael's Retirement Planning Blog

Free financial e-book by Suze Orman

Tuesday January 13, 2009
Whoever said "There's no such thing as a free lunch" apparently couldn't convince Oprah Winfrey or Suze Oman. Collaborating together, they have made Orman's new book "Suze Orman's 2009 Action Plan" available as a free e-book at Oprah's web site. Getting your free book, which includes a chapter on Retirement Investing, is as simple as downloading a file. There are only two things you need to know:I guess lunch goes bad at midnight.

No distribution required. Good idea?

Monday January 12, 2009
The government eliminated the 2009 minimum distribution requirement. (It did not waive it for 2008.) Folks over 70 1/2 who would otherwise be required to take funds from their qualified accounts or face a 50% penalty will not need to do so for the 2009 tax year.

This leaves me a question and I'd like your opinion:

Does this temporary rule change matter?

If you're a retiree, can you afford not to take your distribution? Many cannot.

If you can afford to wait to take your money until 2010, it's nice not to be forced to sell at a depressed price, but so what? You could have just bought back the security in your taxable account anyway, no true loss realized. Meanwhile the government, which is a bit of a deficit itself, voluntarily gives up more tax revenue. Strange? Not strange?

What do you think?

Long Term Care: Another Challenge From the Home and Stock Price Declines

Friday January 9, 2009
With home and stock portfolio values in rapid descent, millions of retirees are worth much less than just a few months ago (like the rest of America). While the implications of this significant loss of wealth are widespread and meaningful, one area discussed in detail recently by The Wall Street Journal is Funding Senior Living In An Economic Downturn.

If there's a silver lining in all this, it's that our collective financial suffering appears matched by the plight of some assisted living and nursing facilities. As a result, there are some negotiation opportunities highlighted by the article for those contemplating entry into such a home. In addition, reverse mortgages, family gifts, and intra-family loans are all potential considerations should long-term care be required. Long-term care is an area of significant financial complexity and should be approached prudently.

2009 Retirement Plan Contribution Limits

Monday January 5, 2009
With financial New Year's resolutions not yet dropped by the wayside, now's a good time to review the increased 2009 retirement plan contribution limits:
  • Maximum 401(k) plan contribution: $16,500
  • Maximum catch-up provision for those born before 1960: $5,500. This means someone born in 1959 or earlier can contribute up to $22,000, up from $20,500 in 2008. These limits are applicable for 401(k), 403(b) and 457 plans.
  • Maximum AGI for credit for retirement plan payins: $55,500 for married filers, $27,750 for singles.
There is no change to the amount an individual can contribute to an IRA: $5,000, unless you were born before 1960, in which case the contribution limit rises to $6,000.

The range of income where you lose your ability to deduct your regular IRA contribution because you are eligible to participate in a workplace retirement plan increased for 2009. If married, the new phase-out range is from $89,000 to $109,000 ($55,000 to $65,000 if single). If one spouse in a married couple is not eligible to participate in a workplace retirement plan, then that spouse may deduct an IRA contribution until that deduction phases out between a combined AGI of $166,000 and $176,000.

The ability to make Roth IRA contributions is phased out between $166,000 and $176,000 for married couples and $105,000 and $120,000 for single individuals.

If you have the ability to save more for retirement, these higher limits may help. If not, consider saving what you can. If you can't put away $5,000 in an IRA before April 15, for example, what can you save by then?

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