Retirement eNews

1) IT'S NOT TOO LATE FOR A 2006 IRA

You've probably heard "Save on taxes while you save for retirement" -- the mantra of the tax-deductible Traditional IRA. How about "Invest now for tax-free income later"?

That's the motto of its lesser-known cousin, the Roth IRA. With a Roth IRA, you pay tax now on your contributions – but withdrawals in retirement are generally tax-free, including what you've earned over the years. Eligible working people can fund a Traditional or Roth IRA for 2006 up to the day they file their tax return (but no later than April 17, 2007).

To find out if you qualify, use the "How much may I contribute to an IRA?" calculator at:
http://partners.leadfusion.com/tools/unionplus/rothira03/tool.fcs

To read more about IRAs, visit:
http://retirement.unionplus.org/money-for-retirement/ira.cfm

2) LOW INCOME? HERE'S HELP TO SAVE FOR RETIREMENT

If your financial situation makes it hard to put money aside for retirement, Uncle Sam is ready to help. Qualifying taxpayers can take a tax credit of up to $2,000 for contributing to an IRA, 401(k), or other qualified retirement plan. You may be eligible if:

• Your income is below a certain level ($25,000 for singles, $37,500 for heads of household, $50,000 for married filing jointly)
• You are 18 or older, not a full-time student, and not claimed as a dependent on someone else's tax return

You may be able to deduct your savings contribution, too. (A deduction reduces your taxable income, while a credit reduces the tax you owe, dollar for dollar.) For details, see:
http://www.irs.gov/taxtopics/tc610.html

UPDATE: For the 2007 tax year, your income must be below $26,000 for singles, $39,000 for heads of household, and $52,000 for joint filers. A 2007 IRA contribution may be made until April 15, 2008.

3) NEW IRA RULE BENEFITS OLDER DONORS

If you're 70 1/2 or older, you can donate money from your IRA to an eligible charity. It's tax-free if the transfer is made directly to the charity. This option is available for tax years 2006 and 2007.

4) SHOULD YOU STOP FUNDING YOUR 401(K)?

It's easy to think of 401(k) contributions as tax-free, but the pain is just postponed. All withdrawals are taxed later, presumably after you're retired. But isn't that when you'd like to be paying LESS tax?

A suggestion: Once you've qualified for any 401(k) matching funds you may be eligible for, start funding a Roth IRA to enjoy tax-free income in retirement. After you max out the Roth IRA, return to the 401(k).

For more about retirement tax planning, go to:
http://retirement.unionplus.org/making-it-last/taxes.cfm

5) USE YOUR REFUND TO REV UP RETIREMENT SAVINGS

As much as you may want to put your 2006 tax refund into savings, that money often has to be earmarked for bill-paying. But now you can split a refund and have it direct-deposited into as many as three accounts at different financial institutions. So why not make one of those accounts an IRA? Over time, every little bit can mean a lot in helping you retire in style.

Find out how to have Uncle Sam divide up your refund at:
http://www.irs.gov/individuals/article/0,,id=163764,00.html

6) NOT READY TO RETIRE YOUR MIND?

Maybe you're thinking of getting a degree you missed out on when you were younger, or changing careers in retirement. In any given tax year, you can claim either the Lifetime Learning Credit or the Hope Credit to offset your educational costs:

• The Lifetime Learning Credit applies to courses taken toward a degree at the undergraduate, graduate, or professional level.
• The Hope Credit applies to the first two years of education after high school.

Since a tax credit cuts your tax bill dollar for dollar, these credits could make learning a very rewarding experience (not just for retirees, but anyone). To find out more, go to:
http://www.irs.gov/taxtopics/tc605.html

7) DO YOU HAVE A ROAD MAP FOR RETIREMENT?

Close to 30% of U.S. adults who intend to retire haven't done any retirement planning, according to a new Wall Street Journal Online/Harris Interactive poll. Congratulate yourself -- you're among the sensible 70%!

If you're looking for a fast, easy way to refine your strategy in about 8 minutes, try our Retirement Road Map at:
http://retirement.unionplus.org

8) STOCKS BEAT REAL ESTATE AS INCOME-BUILDERS

One out of every 6 people who plan to retire believes that "equity in my home" will be their primary source of retirement income, according to a new report by Fidelity Investments. But that belief could be dangerous if it keeps you from investing in stocks or stock mutual funds.

One dollar invested in real estate in 1963 would have grown to only $1.79 by 2006, the report says, while a dollar invested in stocks would have grown to $12.36. The bottom line: If you're deciding where to put your retirement savings, strive for a well-diversified portfolio that includes stocks, since investing in them could pay better returns than prepaying the mortgage.

NOTE: Your desired level of risk and your age will affect when and how much you wish to invest in stocks. Generally, investing more heavily in stocks is better at an earlier age because the market will have more time to work through fluctuations.

The full Fidelity report is available at:
http://www.fidelityresearchinstitute.com

9) CONGRESS PROBES 401(K) FEES, MEDICARE DRUG PRICES

In March, the House Education and Labor Committee launched hearings on 401(k) fees. Spearheading the inquiry is Rep. George Miller (D-CA), the committee chairman, who is concerned that hidden fees are eating away at the savings of plan participants.

Meanwhile, Rep. Henry Waxman (D-CA) began an investigation in February into how much of the discount that Medicare prescription drug plans get from pharmaceutical companies is being passed on to Medicare beneficiaries.

Keep tabs on these probes via the Alliance for Retired Americans:
http://www.retiredamericans.org

10) AFL-CIO PROPOSES UNIVERSAL MEDICARE

In a landmark decision on March 6, the AFL-CIO Executive Council unanimously condemned the expensive and "creaky" employer-based health care system that leaves 47 million Americans uninsured and millions more underinsured. The group of union leaders voted to campaign for a dramatic change: expanding Medicare to the entire country.

With more and more companies reducing or dropping coverage for workers and retirees, health care is the #1 battle in bargaining. This national crisis led the Executive Council to endorse a system of universal coverage administered by government, which would be able to cut administrative costs and negotiate lower prices.

http://blog.aflcio.org/2007/03/06/afl-cio-executive-council-universal-health-
should-be-built-on-medicare-blueprint/

11) TELL US WHAT YOU THINK!

What do you want to know more about? How can we improve Retirement eNews and the Retirement Planning Center website? Give us your opinion at:
http://www.surveymonkey.com/s.asp?u=97192159747