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Some employers are doing away
with the 401(k) match, a benefit once considered almost sacred. The list of
companies that have suspended or cut back corporate matching in their
defined-contribution retirement plans this year includes General Motors,
Frontier Airlines, car-rental company Dollar Thrifty Automotive, broadcaster
Entercom Communications, newspaper chain Lee Enterprises, and real estate
brokerage Cushman & Wakefield.
A recent study by benefits
consultant Watson Wyatt Worldwide of 248 U.S. companies found that 2% had
already reduced or eliminated the match and predicts another 4% will do so
within the next twelve months.
College or Retirement?
The recent stock market slide
that has eroded retirement savings and savings for children’s college with equal
savagery. The result is a dilemma for parents as to where to cut back first.
Financial planners would argue that even if college looms soon for your child,
retirement savings has to stay the top priority. You can take out a loan for
college but you cannot take out a loan for your retirement.
Advisers often tell their
clients to set aside a predetermined amount regularly that does not compromise
their ability to save for retirement and then let their children pay the rest
through grants, loans and part-time work.
A telephone survey last spring
of more than 1,400 parents and students conducted by Gallup Inc., found that
parents contribute the largest share of a student’s education. They pay on
average for 32% through income and savings and borrow another 16%. The average
student covers 33% of the cost, on average with grants and scholarships
comprising 15% and friends and relatives paying another 3%.
A new report from Packaged
Facts, “The Retirement Products Market for Baby Boomers and Generation X in the
U.S,” notes that more than one-third of baby boomers saved nothing from their
annual income during the last year.
Retirement expert Eric Bachman
and Certified Public Accountant Jeanne Duhe share six year-end tax tips to help
senior citizens save money on their 2008 taxes.
1.
Take a Senior Citizen Deduction
The IRS allows those age
sixty-five and over to take an additional deduction worth $1,350 for single
filers or $2,100 for a married couple.
2.
Claim Stock Losses Now
Seniors with stock losses
should consider claiming stock losses before year-end. They may use the losses
to offset stock gains, including gain distributions from mutual funds. In
addition to offsetting gains, seniors can claim up to $3,000 in losses per year
to reduce taxable income for 2008. Any losses in excess of that amount are
carried forward to future returns.
3.
Seniors Seeking Cash Should Consider a
Reverse Mortgage
A reverse mortgage remains a
viable financial tool for those sixty-two and older. It enables them to unlock
the equity in their homes as a lump sum payment with no tax implications.
4. Pay Outstanding Medical
Bills Now
An individual with either a
low taxable income or large medical expenses should consider paying all
outstanding medical bills before the end of the year as an additional deduction.
Eligible deductions include supplemental health insurance, doctor bills,
hospital bills, prescription drugs, and medical mileage, i.e., the number of
miles traveled to and from the doctor, pharmacy, or hospital.
5. Be Aware of the Social
Security Income Threshold
Senior citizens who continue
to work while drawing social security should be aware of mandated income
thresholds. If income exceeds $25,000 for one person or $32,000 for a married
couple, then social security begins to be counted as taxable income. Seniors
close to these income limits should consider pushing some income into next year
to protect all of their social security from income taxes.
6. Understand IRS Rules for
IRAs
The IRS requires
taxpayers to begin withdrawing funds from their IRAs in the year after the year
they turn seventy and one-half. In that instance, seniors would then be
obligated to take two withdrawals to include the current year, potentially
entering them into a higher tax bracket. In most cases then, seniors should plan
ahead and begin withdrawals in the year that they actually turn seventy and one
half to avoid this scenario. |
According to Hewitt
Associates, a leading human resources consulting firm, almost three quarters of
Canadian employers see phased retirement programs as an important element of
their human resources strategy over the next five years. Over half already have
a formal and/or informal phased retirement program in place. Another third
reported they do not currently offer a phased retirement program but are
interested in establishing one. Organizations in the United States express a
similar interest: Forty-seven per cent currently offer phased retirement
programs while nearly 40% more plan to do so.
Only 35% of households headed
by someone age seventy-five or older own any stock at all compared to 63% of
households headed by people between fifty-five and sixty-four.
Idaho
Pension Theft
Vernon Geier, of Las Vegas,
Nevada, has been sentenced for interstate theft from the Public Employee
Retirement System of Idaho (PERSI). Geier was sentenced to five years on
probation, during which he will serve three months of incarceration and three
months of home detention. Vernon Geier admitted and pled guilty to the charge in
August 2008.
Between January 2002 and
November 2004, Geier and his mother had bank accounts at Wells Fargo in Las
Vegas, Nevada. His mother received retirement benefits from PERSI, which were
electronically deposited into her account. Geier's mother died in January 2002
but Geier did not notify PERSI of her death. As a result, PERSI continued to
electronically transfer funds into his mother's account until November 2004 when
PERSI was apprised by other sources that Ms. Geier was deceased. The initial
loss amount was approximately $65,000.
Representative Joe Sestak,
D-Pennsylvania, has introduced the Financial Security in Retirement Act of 2008
legislation that would "suspend for 2008 and 2009 the required minimum
distribution requirements with respect to certain defined contribution plans to
the extent the interest of an individual in such plans does not exceed
$300,000."
The bill was introduced on
Nov. 19 and was referred to the House Ways and Means Committee.
A retired banker whose
departing pay has been questioned by the Governor and at least one South
Carolina Congressman does not want to be an obstacle to his former company
receiving federal bailout funds. For that reason Mack Whittle is willing to
discuss with Treasury Department officials the $18 million retirement pay
package he got when he left Greenville-based The South Financial Group Inc. last
month.
South Carolina Governor Mark
Sanford and U.S. Representative Bob Inglis, R-S.C., have both criticized the
government's plan to stabilize the U.S. financial system when companies getting
the money have executives enjoying "golden parachutes" despite poor financial
performance. Whittle, though, negotiated his retirement package from the company
he founded before the federal government unveiled its Troubled Asset Relief
Program (TARP) in September. Besides, Whittle contends, Treasury officials knew
about his retirement package when The South Financial Group received preliminary
approval for $347 million as part of the federal bailout program.
Still, Whittle has said in a
letter to Treasury officials that he was willing to discuss his pay "if the only
item standing in the way of TSFG's receipt of a TARP capital allocation is my
retirement agreement."
Michigan Lawmakers Weasel Out
Michigan lawmakers seem likely
to finish the year without halting or scaling back a perk that's the envy of
most workers -- full health care coverage in retirement after just six years of
service. Under current law, former legislators can tap into the health insurance
once they turn fifty-five. During heated budget discussions last year, lawmakers
said the generous health benefit should be adjusted to be less costly to
taxpayers. Yet, the old system remains in place. And lawmakers seem content to
let the issue die rather than deal with it when they return in early December.
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