8 Ways to Squeeze the Most From Retirement Planning

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Take credits, get help to prepare for future, says Bills.com

Although retirement accounts have taken a beating in the stock market, today's economy also offers many opportunities for people planning their retirement, said Ethan Ewing, president of Bills.com, a free online consumer portal.

The stock market plummeted in 2008, and many of the nation's retirement investments fell dramatically. According to the Employee Benefit Research Institute (EBRI), the average 401(k) account balance fell nearly 20 percent for those closest to retirement, workers over age 55. And nearly 43 percent of older workers have less than $50,000 saved for retirement. AARP adds the dire statistic that during 2008, one in five workers age 45 and older stopped investing in their retirement accounts.

"For those approaching retirement, the drop in the stock market has indeed put a crimp in their plans," Ewing said. "If you are wondering what to do next to salvage your retirement, here are a few suggestions."

1.    Take credit for retirement contributions. The Saver's Credit allows people with adjusted gross incomes (AGI) of up to $53,000 for couples or $26,500 single to claim a tax credit for their retirement contributions. The credit varies from 10 percent to 50 percent of the contribution, depending on income, and is in addition to tax deductions for the contribution.

2.    Social Security recipients get $250 credit. Those who receive Social Security benefits, along with railroad retirees, veterans and state government retirees, will receive a one-time Economic Recovery Payment of $250 per taxpayer in 2009.

3.    Watch for the Make Work Pay Credit. Even part-time workers may be eligible for a $400 tax credit ($800 for married couples filing jointly) for 2009 and 2010. The credit phases out for couples with AGI of $150,000 to $190,000 or individuals with AGI over $75,000 to $95,000. Most employers will automatically work the credit into paychecks after April 1. Receiving the Economic Recovery Payment will reduce the Make Work Pay credit.

4.    Take a tax break for a new car. For future retirees planning to buy a new car before they punch out, Ewing said, 2009 is a good time to purchase. Interest rates are very low, incentives are high, and new regulations allow most taxpayers to deduct the average 6 percent state sales tax, as well as local sales and excise taxes, paid on new car purchases.

5.    Consider a refinance. Today's mortgage interest rates are at all-time lows. "If you are still paying a home mortgage, consider refinancing while you have income from work, especially if you can shorten your payment term to 15 years or even seven years," Ewing suggested.

6.    Purchase a home. For renters, now might be the time to buy. Home prices have dropped along with interest rates. In addition, first-time homebuyers (including people who have not owned a home in the past three years) may be eligible for a tax credit of up to $8,000 on a home purchase.

7.    Get mortgage help. If you are having trouble paying an existing home loan, visit http://www.makinghomeaffordable.gov to learn about options for help.

8.    Consider a reverse mortgage. "If you own your home outright, consider looking into a reverse or home equity conversion mortgage (HECM) now or in the future," Ewing said. Reverse mortgages allow homeowners over age 62 to borrow against the value of their home, with the borrowed amount repaid from equity after the owner's death. The Federal Housing Administration has increased HECM loan limits to $625,500. If considering these options, make sure to research them carefully, as they are not right for everyone.

"Although our current economy makes for challenging retirement planning, it has brought several benefits for individuals and families," Ewing added. "Talk with your family and consult a financial advisor to develop the plan that will work best for your situation."

About Bills.com (http://www.bills.com)
Based in San Mateo, Calif., Bills.com is a free one-stop portal where consumers can educate themselves about complex personal finance issues and comparison shop for products and services including credit cards, debt relief assistance, insurance, mortgages and other loans. As the online portal to Freedom Financial Network, LLC, the company has served more than 50,000 customers nationwide since 2002 while managing more than $1 billion in consumer debt. Its RSS feed is available at http://www.bills.com/news_releases/.

Bills.com holds the No. 257 spot on the Inc. 500 list for 2008, and the No. 3 spot on Entrepreneur Magazine's Hot 100 list of the fastest-growing U.S. companies. Company co-founders and co-CEOs Andrew Housser and Brad Stroh were named to the Silicon Valley/San Jose Business Journal's "40 Under 40" list in 2008, and were recipients of the Northern California Ernst & Young 2008 Entrepreneur of the Year Award.

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Aimee Bennett

Ethan Ewing
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