New Ways to Make Retirement Budgets Grow in 2009

The recent dawn of the New Year brings with it fresh concerns about the state of the economy, and senior citizens in particular are searching for new ways to save money during their retirement. As tax season approaches, it is important that older Americans be aware of some simple steps they can take to save themselves additional dollars this year. Seniors in need of extra income can also explore ways beyond tax savings to help boost their cash on hand. nnTake a Senior Citizen DeductionnnThe IRS allows those age 65 and over to take an additional deduction worth $1,350 for single filers or $2,100 for a married couple. This also applies to individuals who do not itemize their deductions because it is added to their standard deduction. Seniors should ask their accountant about this deduction before they file 2008 taxes. nnClaim Stock Losses NownnThose seniors with stock losses should consider claiming them on their 2008 tax returns. Losses are used to offset any stock gains, including gain distributions from mutual funds. In addition to offsetting gains, seniors can claim up to $3,000 in losses per year to effectively reduce taxable income for 2008. nnSeniors Seeking Cash Should Consider a Reverse MortgagennIncome earned from a reverse mortgage is tax free, meaning that seniors in need of cash can unlock the equity in their homes as a lump sum payment with no tax implications. A reverse mortgage remains a viable financial tool for those 62 and older because it does not take into account credit history or a borrower’s current financial situation. It is also a powerful way to lock in current home values for those seniors concerned about continued losses in property values. New rules for 2009 also make it possible for seniors with higher value homes to secure a reverse mortgage, for those interested in downsizing to use a reverse mortgage for purchase, and for condo owners to now secure a reverse mortgage.nnBe Aware of Social Security Income Threshold nnThose senior citizens who continue to work while drawing social security should be aware of mandated income thresholds. If income exceeds $25,000 for one person or $32,000 for a married couple, then social security begins to be counted as taxable income. This can be a large burden on senior citizens. If a senior is close to these income limits, they should consider delaying some income to protect all of their social security from income taxes. nnUnderstand IRS Rules for IRAsnnThe IRS requires taxpayers to begin withdrawing funds from their IRAs in the year after the year they turn 70 and one half. In that instance, seniors would then be obligated to take two withdrawals to include the current year, potentially entering them into a higher tax bracket. In most cases then, seniors should plan ahead and begin withdrawals in the year that they actually turn 70 and one half to avoid this scenario. nnConsider Selling your Life Insurance For Tax-Free CashnnMany seniors in need of cash who also hold life insurance policies may have considered allowing those policies to lapse. Instead, seniors can take advantage of a little known tactic predominantly employed by those with financial advisors to turn their life insurance policy into cash. Through life settlement, a policyholder can sell their life insurance to an institutional investor for an amount above the policy’s cash surrender value. Seniors can claim the amount equal to what they’ve paid into the policy over its term as tax-free income. Any gains above this threshold would be considered taxable. nnThese are just a few of the options available to seniors who are interested in either generating money to help with retirement expenses or even increase their retirement lifestyle, or just to save a few extra dollars this tax season. For information on these ideas or for others, please visit our website at www.goldengateway.com. Once there, visitors can also access a number of other online resources designed to help retirees and older Americans improve their finances in retirement. Specific tools and assistance available at Golden Gateway Financial include our Budget Reality Check tool, an award-winning Reverse Mortgage Calculator, and counselors to help with reverse mortgage or life settlement plans.