Interview with Channel 11’s Joel Thomas
February 24, 2009 by Jean Keener, CRPC, CFDP · Leave a Comment
See my interview with Channel 11’s Joel Thomas on the day of the Your Money Bus tour. We talked about the importance of saving and planning for how you want to live now and in the future. Coverage of the Your Money Bus tour was included as part of their Surviving 09 series.
http://cbs11tv.com/video/?id=39019@ktvt.dayport.com
The Stimulus Act and You
February 18, 2009 by Jean Keener, CRPC, CFDP · Leave a Comment
On February 17, 2009, President Obama signed into law the American Recovery and Reinvestment Act of 2009 (the 2009 “Stimulus Act”). The legislation carries a projected cost of $787 billion, and contains hundreds of provisions. Key provisions that may be relevant to you include:
- New Making Work Pay Tax Credit–The Act establishes a new refundable income tax credit for 2009 and 2010 equal to 6.2% of earned income, up to $400 ($800 in the case of a married couple filing jointly); withholding schedules will be adjusted to increase current take-home pay to reflect the credit. The credit is phased out for individuals with modified adjusted gross income exceeding $75,000 ($150,000 for married couples filing jointly).
- Earned Income Tax Credit–The earned income tax credit percentage for families with three or more qualifying children increases from 40% to 45% for 2009 and 2010. The income thresholds at which the credit phases out for married couples filing joint returns also increases for 2009 and 2010.
- Child Tax Credit–For 2009 and 2010, the refundable portion of the child tax credit increases to 15% of earned income in excess of $3,000.
- Hope Credit–For 2009 and 2010, the Hope credit is renamed the American Opportunity Tax Credit, the annual limit per eligible student increases to $2,500 and the credit is now available for the first four years of post-secondary education. Up to 40% of the credit is refundable. The definition of qualified expenses now includes course materials, and the credit can be claimed against alternative minimum tax (AMT) liability. The income levels at which the credit phases out also increase significantly.
- Tax Credit for First-Time Homebuyers–The existing first-time homebuyer credit now applies to qualifying home purchases made before December 1, 2009, and the maximum credit amount is now $8,000 ($4,000 for married individuals filing separately). In addition, the recapture rules (requiring that the credit be paid back) are waived for qualifying homes purchased after December 31, 2008, and before December 1, 2009, provided that the home continues to be the taxpayer’s principal residence for 36 months.
- Deduction for Qualified Motor Vehicles–State sales tax and excise tax related to the purchase of a qualified motor vehicle after February 17, 2009 and before January 1, 2010 can be deducted as part of the deduction for state and local taxes paid on Form 1040, Schedule A, or as part of the standard deduction. The deduction is capped at the tax attributable to a maximum $49,500 purchase price, and is phased out for individuals with modified adjusted gross income exceeding $125,000 ($250,000 for married couples filing joint returns).
- Alternative Minimum Tax (AMT)–2008 temporary AMT provisions are extended to 2009; AMT exemption amounts are increased, and nonrefundable personal credits will continue to offset regular tax liability and alternative minimum tax liability.
| Filing Status | 2008 AMT Exemption Amount | 2009 AMT Exemption Amount |
| Unmarried | $46,200 | $46,700 |
| Married Filing Jointly | $69,950 | $70,950 |
| Married Filing Separately | $34,975 | $35,475 |
- Bonus Depreciation–The additional 50% first-year depreciation deduction applies for an extra year, through 2009 (through 2010 for certain longer-lived and transportation property).
- IRC Section 179 Expensing–The increased limits relating to IRC Section 179 expensing now apply through 2009. As in 2008, the maximum amount that a taxpayer may expense is $250,000 of the cost of qualifying property placed in service for the taxable year. This amount is reduced by the amount by which the cost of qualifying property placed in service during the taxable year exceeds $800,000.
- Net Operating Loss (NOL) Carrybacks–Eligible small businesses (small businesses with average gross receipts of $15 million or less) can elect to extend the existing two-year carryback period for 2008 NOLs to 3, 4, or 5 years.
- Unemployment Compensation–Up to $2,400 of unemployment compensation benefits received in 2009 are excluded from gross income for federal income tax purposes.
- Small Business Stock–The percentage exclusion for qualified small business stock sold by an individual increases from 50% (60% for certain empowerment zone businesses) to 75% for stock issued after February 17, 2009 and before January 1, 2011.
- Economic Recovery Payments–Individuals who are eligible for Social Security benefits, Railroad Retirement benefits, Veteran’s compensation or pension benefits, or Supplemental Security Income (SSI) benefits will generally receive a one-time Economic Recovery Payment of $250.
- COBRA–For involuntary terminations that occur on or after September 1, 2008 and before January 1, 2010, individuals who qualify will only need to pay 35% of COBRA premiums for a period of up to 9 months. The remaining 65% of COBRA premiums will be subsidized. For individuals with adjusted gross income exceeding $125,000 ($250,000 for married individuals filing a joint return), the subsidy must be paid back in part or in full.
Free Financial Advice Bus Tour in D-FW
February 6, 2009 by Jean Keener, CRPC, CFDP · Leave a Comment
Mark your calendars for February 23 from 11:30 to 1:30. The national Your Money Bus tour will be making a stop at a place near and dear to my heart – Southlake Central Market. Local financial advisors, including me, will be there to answer your financial questions at no charge.
We’re all keenly aware of the economic challenges our country and many individuals are facing right now. An unstable economy, rising unemployment rates and home foreclosures continue to impact residents throughout our area.
To help individuals address these issues, we’ll be delivering complimentary financial advice from independent registered investment advisors along with free educational materials focusing on savings and debt reduction.
Central Market has generously agreed to host the bus, and will be providing space in their cooking school for the complimentary financial sessions. It will be a great opportunity to get your questions answered in a fun, upbeat atmosphere. Thanks to Central Market’s Community Relations Manager Ren Knight for arranging the stop!
The bus tour itself is presented by the National Association of Personal Financial Advisors Foundation, Kiplingers, and TD Ameritrade. The bus will also be making stops at UT Arlington and in Dallas. Here’s the full schedule:
9:00 am to 11:00 am – Free advice event at the Center for Continuing Education and Workforce Development at the University of Texas at Arlington (140 W. Mitchell Street, Arlington, TX). Bring your financial questions and get them answered by a financial advisor.
11:30 am to 1:30 pm – Free advice event at the Central Market Southlake (1425 E. Southlake Blvd, Southlake, TX). Bring your financial questions and get them answered by a financial advisor.
2:00 pm to 5:00 pm – Free advice event at the J Erik Jonsson Central Library (1515 Young Street, Dallas, TX). Bring your financial questions and get them answered by a financial advisor.
February 2009 Newsletter
February 5, 2009 by Jean Keener, CRPC, CFDP · Leave a Comment
The February 2009 KFP newsletter is now available. The topics for this month are: What to do when your employer stops matching your 401(k), working during retirement, college costs update, and your credit score. There’s also some information on the Your Money Bus tour stop in D-FW. Enjoy!
Click here to view the February 2009 newsletter.
Working During Retirement
February 5, 2009 by Jean Keener, CRPC, CFDP · Leave a Comment
Planning on working during retirement? If so, you’re not alone. An increasing number of employees nearing retirement plan to work at least some period of time during their retirement years.
Why work during retirement?
Clearly, if you work during retirement, you’ll be earning money and relying less on your retirement savings–leaving more to potentially grow for the future and making your savings last longer, as shown in the chart below:
| Assumptions: Retirement savings $1,000,000 Earnings rate 6% Preretirement income $150,000 Social Security $2,000/month Desired income replacement 80% ($120,000/year, $10,000/month) |
|||
| Without working, you’ll need to use $8,000 ($10,000 desired income minus $2,000 Social Security) of retirement savings per month, and your savings will last 16 years. | |||
| But if you earn this amount monthly… |
for 3 years, your savings will last… |
for 5 years, your savings will last… |
for 10 years, your savings will last… |
| $1,000 | 17 years | 18 years | 19 years |
| $2,000 | 18 years | 19 years | 22 years |
| $3,000 | 19 years | 21 years | 26 years |
| $4,000 | 20 years | 23 years | 32 years |
| $5,000 | 22 years | 26 years | 39 years |
| This is a hypothetical example and is not intended to reflect the actual performance of any specific investment, and does not take into account the effect of taxes and inflation. | |||
If you continue to work, you may also have access to affordable health care, as more and more employers are offering this important benefit to part-time employees.
But there are also non-economic reasons for working during retirement. Many retirees work for personal fulfillment–to stay mentally and physically active, to enjoy the social benefits of working, and to try their hand at something new–the reasons are as varied as the number of retirees.
How will working affect Social Security?
If you work after you start receiving Social Security retirement benefits, your earnings may affect the amount of your benefit check. Your monthly benefit is based on your lifetime earnings. When you become entitled to retirement benefits at age 62, the Social Security Administration calculates your primary insurance amount (PIA), upon which your retirement benefit will be based. Your PIA is recalculated annually if you have any new earnings that might increase your benefit. So if you continue to work after you start receiving retirement benefits, these earnings may increase your PIA and thus your future Social Security retirement benefit.
But working may also cause a reduction in your current benefit. If you’ve reached full retirement age (65 to 67, depending on when you were born), you don’t need to worry about this– you can earn as much as you want without affecting your Social Security retirement benefit.
If 
you haven’t yet reached full retirement age, $1 in benefits will be withheld for every $2 you earn over the annual earnings limit ($14,160 in 2009). A special rule applies in your first year of Social Security retirement–you’ll get your full benefit for any month you earn less than one-twelfth of the annual earnings limit, regardless of how much you earn during the entire year. A higher earnings limit applies in the year you reach full retirement age. If you earn more than this higher limit ($37,680 in 2009), $1 in benefits will be withheld for every $3 you earn over that amount, until the month you reach full retirement age–then you’ll get your full benefit no matter how much you earn. (If your current benefit is reduced because of excess earnings, you may be entitled to an upward adjustment in your benefit once you reach full retirement age.)
Not all income reduces your Social Security benefit. In general, Social Security only takes into account wages you’ve earned as an employee, net earnings from self-employment and other types of work-related income, such as bonuses, commissions, and fees. Pensions, annuities, IRA distributions, and investment income won’t reduce your benefit.
Also, keep in mind that working may enable you to put off receiving your Social Security benefit until a later date. In general, the later you begin receiving benefit payments, the greater your benefit will be. Whether delaying the start of Social Security benefits is the right decision for you, however, depends on your personal circumstances.
One last important point to consider: in general, your Social Security benefit won’t be subject to federal income tax if that’s the only income you receive during the year. But if you work during retirement (or receive any other taxable income or tax-exempt interest), a portion of your benefit may become taxable. IRS Publication 915 has a worksheet that can help you determine whether any part of your Social Security benefit is subject to federal income tax.
How will working affect my pension?
If you work for someone other than your original employer, your pension benefit won’t be impacted at all–you can work, receive a salary from your new employer, and also receive your pension benefit from your original employer. 
But if you continue to work past your normal retirement date for the same employer, or if you retire and then return to work for that employer, you need to understand how your pension will be impacted.
Some plans will allow you to start receiving your pension benefit once you reach the plan’s normal retirement age, even if you continue to work. Other plans will suspend your pension benefit if you work beyond your normal retirement date, but will actuarially increase your payment when benefits resume to account for the period of time benefits were suspended. Still other plans will suspend your benefit for any month you work more than 40 hours, and will not provide any actuarial increase–in effect, you’ll forfeit your benefit for any month you work more than 40 hours.
Some plans provide yet another option–”phased retirement.” These programs allow you to continue to work on a part-time basis while accessing all or part of your pension benefit. Federal law encourages these phased retirement programs by allowing pension plans to start paying benefits once you reach age 62, even if you’re still working and haven’t yet reached the plan’s normal retirement age.
If your pension plan calculates benefits using final average pay, be sure to discuss with your plan administrator how your particular benefit might be affected by the decision to work part-time. In some cases, reducing your hours at the end of your career could reduce your final average pay, resulting in a smaller benefit than you might otherwise have received.
How will working affect my health benefits?
Many individuals work during retirement to keep their medical coverage. If working during retirement for you means moving from full-time to part-time, it’s important that you fully understand how that decision will impact your medical benefits.
Some employers, especially those with phased retirement programs, offer medical coverage to part-time employees. 
But other employers don’t, or require that you work a minimum number of hours to be benefits eligible. If your employer doesn’t offer medical benefits to part-time employees, you’ll need to look for coverage elsewhere. If you’re married, the obvious option is coverage under your spouse’s health plan, if your spouse works and has coverage available. If not, you may be eligible for COBRA coverage.
COBRA is a federal law that allows you to continue receiving medical benefits under your employer’s plan for some period of time, usually for 18 months, after a qualifying event (including loss of coverage due to a reduction in hours). But it’s expensive–you typically have to pay the full premium yourself, plus a 2% administrative fee. (COBRA doesn’t apply to employers who have fewer than 20 employees.) Another option is private health insurance, but that will also be very expensive.
Of course, once you turn 65, you’ll be eligible for Medicare. You’ll want to contact the Social Security Administration approximately three months before your 65th birthday to discuss your options. If you have private or employer-sponsored health insurance, talk to your benefits administrator or insurance representative before enrolling in Medicare to find out how your current health insurance fits in with Medicare.