How to Die Before You Money Runs Out

This new Issue Brief from the Center for Retirement Research at Boston College, Making Your Nest Egg Last a Lifetime by Anthony Web, examines strategies for making your retirement savings last your lifetime.

Media attention on retirement security generally focuses on the need to save enough to enjoy a comfortable retirement.  However, accumulating a nest egg is no longer the only significant challenge – the other is managing one’s nest egg in retirement.  In contrast to previous birth cohorts who often received a lifetime income from a defined benefit pension plan, in today’s 401(k) world retirees must choose how to convert their accumulated savings into a monthly paycheck.

One straightforward solution to the drawdown challenge is an immediate annuity, which turns a lump sum of income into a lifelong payment stream.  However, for various reasons, such annuities have not proven broadly popular.  Therefore, this brief examines several alternatives.  All such strategies involve a trade-off between maximizing consumption and minimizing the risk of running out of money.  Calculating the optimal strategy is really hard – maybe impossible.  But, despite the complexity of the problem, some strategies are clearly superior to others..

This paper examines three strategies: 1) spend the income, conserve the capital; 2) spend down over their estimated life expectancy; and 3) spend a fixed percent of their initial nest egg in each year. After examining all three strategies, the author concludes that households approaching retirement should annuitize a sufficient amount of their wealth to satisfy minimum living standards.

 

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FDIC Issues Foreclosure Prevention Toolkit

In  response to the many foreclosure scams that have been uncovered. The FDIC has issued a toolkit that homeowners who are in fear of foreclosure.

Homeowners who currently have, or expect to have, difficulty making their payments should contact their loan servicer or reputable counseling agency as soon as possible to discuss options. Troubled borrowers should be careful in dealing with organizations that encourage borrowers to cease making payments or walk away from their home while also promising to repair their credit. If it sounds too good to be true, it may well be a scam that will damage the borrower's credit and cost more in the long run. Working directly with the servicer or legitimate non-profit organizations is the best approach for troubled borrowers.

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90 Percent Rate Their Health Insurance Good to Excellent

Given the news you might think that most insured are dissatisfied with their health insurance. Not so, according to a recent survey by the Kaiser Family Foundation. Many with insurance, however, are worried about the increasing cost of the insurance and future illnesses will be covered.

Read Report: Americans' Satisfaction with Insurance Coverage

Recovery Education Tax Credit

From IRS New Release

The new credit modifies the existing Hope Credit for tax years 2009 and 2010, making the Hope Credit available to a broader range of taxpayers, including many with higher incomes and those who owe no tax. It also adds required course materials to the list of qualifying expenses and allows the credit to be claimed for four post-secondary education years instead of two. Many of those eligible will qualify for the maximum annual credit of $2,500 per student.

The full credit is available to individuals whose modified adjusted gross income is $80,000 or less, or $160,000 or less for married couples filing a joint return. The credit is phased out for taxpayers with incomes above these levels. These income limits are higher than under the existing Hope and Lifetime Learning Credits.

For more information, see Publication 970, Tax Benefits for Education.

Questions and Answers

If you still have questions about the American Opportunity Credit, these questions and answers might help.

Related Items

• Tax Benefits for Education: Information Center

• IR-2009-78, Special IRS Web Section Highlights Back-to-School Tax Breaks; Popular 529 Plans Expanded, New $2,500 College Credit Available

• Flyers, posters and marketing products

• The American Recovery and Reinvestment Act of 2009: Information Center

A Bounce Back for Retirement Savings

The Urban Institute examines the recent uptick in financial markets and the positive impact on retirement savings.

The stock market lost 56 percent of its value between September 30, 2007, and March 9, 2009. These losses reduced the retirement savings of American households. Recently, however, a good portion of these losses has been reversed. Equities gained 53 percent between March 9, 2009 and August 31, 2009.

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KFF Employer Health Benefits 2009 Annual Survey

The Kaiser Family Foundation has posted their 2009 annual survey of employer health plans.

Premiums for employer-sponsored health insurance rose to $13,375 annually for family coverage this year—with employees on average paying $3,515 and employers paying $9,860, according to the benchmark 2009 Employer Health Benefits Survey released today by the Kaiser Family Foundation and the Health Research & Educational Trust (HRET).

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2009 State-by-State Review of Closing Costs

Bankrate.Com has posted the 2009 review of closing costs. The highest cost state was Texas, with NYC second. The ranking is based on a $200,000 mortgage, 20 percent down and good credit.

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Forced Arbitration Is Ubiquitous, New Public Citizen Study Finds

Public Citizen is highly critical of industries that impose contractual obligations forcing consumers into binding arbitration. They contend that arbitrators often favor businesses over consumers.

Read more.

Seniors in Medicare Advantage Receive Higher Quality Care, New Reports Show

This is the conclusion in a study conducted by American Health Insurance Plan. The study compares Medicare Advantage Plans and fee-for-service plans in California and Nevada.

Read more.

New Vehicle Tax Deduction for 2009

IRS News Release

Nine Facts about the New Vehicle Sales and Excise Tax Deduction

Taxpayers who buy new motor vehicles this year may be entitled to a special tax deduction for the sales or excise taxes on those purchases when they file their 2009 federal tax returns next year. This tax break is part of the American Recovery and Reinvestment Act of 2009.

Taxpayers in states that do not have state sales taxes may be entitled to deduct other fees or taxes imposed by the state or local government.

Here are nine important facts the IRS wants you to know about the deduction.

• 1. State and local sales and excise taxes paid on up to $49,500 of the purchase price of each qualifying vehicle are deductible.
• 2. Qualified motor vehicles generally include new cars, light trucks, motor homes and motorcycles.
• 3. To qualify for the deduction, the new cars, light trucks and motorcycles must weigh 8,500 pounds or less. Motor homes are not subject to the weight limit.
• 4. Purchases must occur after Feb. 16, 2009, and before Jan. 1, 2010.
• 5. Taxpayers who purchase new motor vehicles in states that do not have state sales taxes may be entitled to deduct other fees or taxes assessed on the purchase of those vehicles. Fees or taxes that qualify must be based on the vehicles’ sales price or as a per unit fee. These states include Alaska, Delaware, Hawaii, Montana, New Hampshire and Oregon.
• 6. Taxpayers who purchase qualified motor vehicles may claim the deduction when they file their 2009 tax return in 2010.
• 7. The deduction may not be taken on 2008 tax returns.
• 8. This deduction can be taken regardless of whether the buyers itemize their deductions or choose the standard deduction.Taxpayers who do not itemize will add this additional amount to the standard deduction on their 2009 tax return.
• 9. The amount of the deduction is phased out for taxpayers whose modified adjusted gross income is between $125,000 and $135,000 for individual filers and between $250,000 and $260,000 for joint filers.

For more information on this and other key tax provisions of the Recovery Act visit the official IRS Website at IRS.gov.

Links:

• Sales Tax Deduction for Vehicle Purchases
• YouTube Video: Vehicle Tax Deduction
• Audio File for Podcast - ARRA Vehicle Tax Deduction: English | Spanish
• The American Recovery and Reinvestment Act of 2009: Information Center

 

CRS Updates "Older Workers: Employment and Retirement Trends,"

Older Workers: Employment and Retirement Trends
Patrick Purcell
Specialist in Income Security
September 16, 2009

Excerpts from Summary

As the members of the “baby boom” generation—people born between 1946 and 1964—
approach retirement, the demographic profile of the U.S. workforce will undergo a substantial
shift as a large number of older workers will be joined by relatively few new entrants to the labor
force. According to the Census Bureau, there will be 204 million Americans aged 25 or older in
2010. By 2030, this number will increase by 23% to more than 251 million. Most of this growth
will occur among people aged 65 and older. The Census Bureau estimates that while the number
of people between the ages of 25 and 64 will increase by 15.5 million (9.4%) between 2010 and
2030, the number of people aged 65 and older is projected to grow by 31.7 million, or 79.2%.

As more workers reach retirement age, employers may try to induce some of them to remain on
the job, perhaps on a part-time basis. This is sometimes referred to as “phased retirement.”
Several approaches to phased retirement—job sharing, reduced work schedules, and rehiring
retired workers on a part-time or temporary basis—can be accommodated under current law. The
Pension Protection Act of 2006 (P.L. 109-280) allows pension plans to begin paying benefits to
workers who have not yet separated from their employers at the earlier of age 62 or the pension
plan’s normal retirement age, which in most plans is 65. Some employers would like to be able to
pay partial pension distributions to workers who have reached the pension plan’s early retirement
age, even if it is earlier than age 62. This would require a change in federal law.

Starting Salaries for College Grads are Down

According to the National Association of Colleges and Employers, the starting salaries of college grads are down 1.2 percent this year and salary offers are down 20 percent. While expected, it recently runs counter to the usual annual increase in starting salaries.

Read the full report.

Top 10 Consumer Complaints

The list was complied by the National Association of Attorneys General:

1. Debt Collection
2. Auto Sales
3. Home Repair/Construction
4. Credit Cards (tie)
5. Internet Goods and Services (tie)
6. Predatory Lending/Mortgages
7. Telemarketing/Do-Not-Call
8. Auto Repair
9. Auto Warranties (tie)
10. Telecom/Slamming/Cramming (tie)

Read more.

Credit Card Satisfaction Declines and Rate and Fees Rise

That’s the finding from a new study by J.D.Power Associates.  From Press Release

WESTLAKE VILLAGE, Calif.: 1 September 2009 - Driven by a significant decrease in satisfaction with fees and rates, overall credit card customer satisfaction declines to a three-year low, according to the J.D. Power and Associates 2009 Credit Card Satisfaction Study^SM released today.

The study finds that overall credit card customer satisfaction decreases to 703 on a 1,000-point scale-the lowest level since the study's inception in 2007. Overall satisfaction among credit card customers remains the lowest across the financial services industries in which J.D. Power and Associates conducts research, including insurance, banking and investment services.

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FDIC Videos on Deposit Insurance

The FDIC has several informative videos covering FDIC deposit insurance.

Link.

New Safeguards on Credit Cards

From the FDIC Consumer News

Credit Cards: New Law Protects Consumers from Surprise Fees, Rate Increases and Other Penalties
Some changes are effective now, most start next year

In May, Congress passed and President Obama signed the Credit Card Accountability Responsibility and Disclosure Act of 2009 — the Credit CARD Act — the most sweeping statutory changes in card protections for consumers since the Truth in Lending Act was enacted in 1968. The new law is intended to help protect consumers from abusive fees, penalties, interest rate increases and other unwarranted changes in account terms.

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Students Go For Less Affordable Loans

The PEW Charitable Trust reports that the loan crisis has had a negative impact on the student loan market.

As Student Debt Rises, More Undergraduates Go Straight to Most Dangerous Loans

Berkeley, CA - 08/25/2009 - In 2007-08, nearly two-thirds (64 percent) of undergraduate students who borrowed private student loans did not take out all they could in safer, more affordable federal loans, according to an analysis (PDF) released today by the Project on Student Debt. In addition, the proportion of all undergraduates who took out private loans increased dramatically – from five percent in 2003-04 to 14 percent in 2007-08.

Read more.