Changes to Required Minimum Distributions for 2009

Congress has passed a change to the Retirement Account rules that require taxpayers to take minimum annual withdrawals after age 70 1/2. If the president signs the bill as expected, the change will be effective for tax year 2009.

Don't be confused and don't fail to withdraw for 2008. There is no change to the rules for required minimum distributions for 2008. The penalty for failure to withdraw the required distribution is onerous - 50% of the required amount not withdrawn.

I proposed a similar change to Indiana senators Bayh and Lugar, and retirement industry experts, several weeks ago. However, I hoped that the change would have been effective for 2008, and it will not be.

RMDs reduce account balances. This is not a good strategy for taxpayers who don’t need the money to live on and who want to keep compounding the money in the account, but the government wants distributions to occur so that they can be taxed.The amount of the RMD is calculated on your retirement account balance at the end of the previous year. In general terms, if your account is worth 40% less now than last December, your RMD would be 40% less if calculated on today’s balances as opposed to last year’s balance. A lower RMD would leave more in the account to compound and grow. A higher RMD further depletes an already devastated account.

The time is now to strategically plan to stop wasting money on taxes you are not required to pay.

Congress passes Worker, Retiree and Employer Recovery Act of 2008

A lame-duck Congress has passed the "Worker, Retiree and Employer Recovery Act of 2008." The act, which President Bush is expected to sign, includes more than 40 major provisions and
over 130 tax code changes.

With this many changes in one bill alone, if you don't think you need a tax specialist to help you minimize your taxes, you're fooling yourself.

The time is now to strategically plan to stop wasting money on taxes you are not required to pay.

Home Energy Credits

A client called to ask whether she should invest in a water heater now (December 2008) or wait until 2009. I really like that she is strategically integrating her taxes with other parts of her life. As I told her, the federal tax credits for energy-efficient windows, doors and water heaters, which were enacted for 2006-2007 were renewed in the fall of 2008 -- but for 2009 only. The credits skip over 2008!! By waiting three short weeks until January 1, 2009, she will reduce her tax bill. Who knows, she might also find a lower price during after-Christmas sales!

The time is now to strategically plan to stop wasting money on taxes you are not required to pay.

When to begin taking Social Security benefits

A common way of deciding when to begin taking Social Security benefits has been to calculate the break-even age. That's the age the client must live beyond in order for the highter, delayed benefits to provide a higher lifetime income.

However, the break-even method omits many factors that can influence the age at which benefits should begin, including cost-of-living adjustments (COLAs), taxes, and spousal benefits.

Contact me to help you decide when is the best age for you to start Social Security benefits.
Making the wrong choice could cost you more than $100,000 over a 30-year period.

The time is now to strategically plan to stop wasting money on taxes you are not required to pay.