Simply Junior

Many employers will offer a 401(k) to their employees. A 401(k) plan offers many advantages to employees. The biggest advantage is tax-deferred investing. These accounts are not taxed until distributions are made.

For 2011, an employee can contribute up to $16,500 into a 401(k) plan. Taxpayers over age 50 are allowed to contribute another $5,500 as a “catch up” contribution for a total of $22,000. This catch up provision was implemented because Congress did not think people were saving enough for retirement. Imagine that-for once they got it right.

Why should you contribute to your 401(k) plan?

* You are on your own with your retirement. That’s right, Long gone are the days when someone would go and work for an employer for 30 years and then retire. They would be eligible for a pension and get their social security benefits. Now most companies no longer offer a pension plan.

* Although some employers have eliminated their pension plan, many will still offer a company match. If your employer offers a match, participate in the 401(k) plan at least up to the amount the company is going to match.

What is another big benefit to a 401(k) plan? Having the money taken out of your paycheck automatically. This is huge. Remember, you can’t spend money you don’t have.

Do you want to have financial piece of mind in retirement? Put the most you can into your 401(k) plan because you’re going to need it.

Action Item: Employees should be participating in their employer 401(k) plan. This should be at least up to the amount of the employer match. For employees that aren’t covered by a pension plan, the 401(k) plan will likely be the foundation of their retirement plan.

Thomas F. Scanlon, CPA, CFP ®

Judging from the way stocks have been moving up and down, and faced with a cautious if not confused market in the months ahead, there are plenty of reasons for concern. Most broad-based investment portfolios had a good first quarter run and gave back these gains by the end of the second quarter — the first down quarter in 15 months. After seven months, the market is up fractionally. So who’s taking the biggest hit?

This turbulence is particularly unsettling for New Seniors for several reasons. Those 65+ depend on their retirement plans to complement and supplement Social Security benefits. Negative growth means the principal is shrinking, because whatever flat sum is needed each month for living expenses is greater than the return on investment. So many of us are worried about running out of money before we run out of life. Not a comforting feeling for those who worked all our lives to have a retirement nest egg.

Many of us have a beef because government workers, whose retirement plans are protected from the same volatility, don’t share the uncertainties private sector retirees must endure. Public employees once made less money in exchange for job security and better benefit packages, including retirement plans. The tide has turned; now this sector makes more in raw salaries than comparable jobs in private business. With states and municipalities in financial trouble, taxpayers must pay the bill for underperforming public employee pension plans. Why? Because it’s in their contracts.

When the economy was good, these deals were negotiated by the unions representing various groups of government workers. At best, everyone thought the market would continue to grow and this clause would not be a problem. The worst case was that elected and appointed officials responsible for putting this plans together, mortgaged our tomorrows so they could look good at the time. Even if you live in a city or state where these outlandish concessions were not made, the federal government will be called upon to bail out those struggling, which means greater deficits, higher taxes or both.

Concurrently, manufacturing is sputtering and retail as well as home sales are off. The good news is people have started to save more, but this does not help an economy that is dependent on consumption to grow and prosper. Jobs won’t be created, other than for government employment, until individuals have confidence enough to start buying. Then businesses will start hiring. And taxes will start coming into the various governments. Taxes don’t need to be raised when people are working and businesses are growing; because this, in turn, generates more tax dollars.

Many politicians don’t want to hear this, because they tend to measure their job performance by how many bills are passed and the size of the budgets attached to the legislation. That’s why it’s important to elect people this November who understand that the spending spree must end and sound fiscal as well as social responsibility must prevail. Otherwise, New Seniors and those following us in the years to come will be faced with many summers of discontent.

Income tax Preparation is a little confusing and complex task because you have to complete your tax return form before the end of filing period to avoid late file penalties. So, you have to prepare your tax return quickly. A step by step guideline is given below for income tax preparation.

• It is better to take some time for the preparation of taxation each year then you will be able to file your tax return in time without any fatigue.

• Spend some time and collect all information about your income which you earned from different sources as a payment for services e.g. your salary, self-employed profits, commissions, fees, social security benefits, income from renting out apartment, pensions and interest from bank for the particular year. Check your books and records carefully to make sure that everything is correct and up-to-date. You need following documents PAN Card Copy, Form 16A, Form 16, Financial Statements, receipts and records for a business or extra income, record of losses or profit, etc. that can be used to get deductions in income tax.

• If you are good in calculation it is best to choose online income tax preparation and tax return filing because it is easy, time saving, cost effective and convenient. A lot of popular tax preparation software are designed with the help of account and taxation experts specially to make the process of tax preparation and filing convenient and hassle free. Make sure that the software you choose supports all aspects of income tax preparation or whatever you need for filing tax return.

• Create an account with a user name, and password on a web site which you select to help you for income tax preparation online. After account creation, the system will show you different forms which you have to fill in. Every step consists of some guidelines which help you what to do from start to end. Always be careful about credibility issues of web site because online filing involves submission of highly sensitive information through a public network. It is better to contact on the numbers mentioned on the site and ensure that nothing is suspicious about the site.

• Enter the information such as names, relationship, date of birth and other required data into the tax preparation software which you have selected carefully. It will help you to lower your tax liability and get additional exemptions for your family. Check your tax return form twice and fill all fields provided there before filing it online.

• If you are assured that your tax return is properly prepared then you can send file to the IRS.
Always keep in mind that the best way for tax preparation is to get ready for it all year long and you should keep your entire document which you need for tax return at a place which is safe and easily accessible. It will keep you relax, composed and organized to report about income, expenditure, savings and income tax to federal and state government.

Changes in the economy can affect your retirement plans. When you start to plan for your retirement, you will need to list your goals and how you plan to achieve them.

Do you know how much money you will need when you retire? Do you know at what age you want to retire?

Most people want to be able to live comfortably when they retire. You get used to a certain standard of living and it is difficult to drop below it. The only way you can be assured that you will have enough money to live comfortably is to start planning at an early age. You should take into account the Social Security benefits you will receive but the important thing here is the age you will be able to receive full benefits. This means that your retirement plan should consist of other investments and savings plans.

One way to determine how much you will need is to use a retirement calculator. It can help you plan properly for your retirement goals. They are designed to assist you in determining a realistic amount you will need once you retire. The calculations you make are a ballpark figure because you have to determine what your life expectancy will be. It also depends on how well you budget your income.

Budgeting for your income for your retirement plan is very important. There are many different types of plans to choose from including 401(k) and IRA plans. Both of these can be set up through your employer. Most companies allow you to pay into the plan and they match what you pay. You should also consider having a plan outside of your employer. You can invest in stocks, bonds, and have a regular savings account you contribute to each month.

If you own a home and it is paid for by the time you retire, you will feel more comfortable not having to make those monthly payments.

You can start planning for your retirement by:

Looking carefully at the pension plan offered by your employer. Creating a budget for your monthly expenses. Using an online retirement calculator to determine how much money you will need when you retire. Looking at your budget again to determine how much you can set aside each week or each month to pay you. Researching stocks, bonds, or funds in which you can invest. Researching financial advisors in your area and meeting with one to help you with your retirement plans. If you take these steps, you can start planning for your retirement now. The last thing you probably want is to have to work when you feel you should retire.