IRS Cracking Down on IRAs

From InvestingDaily.com:

The IRS is taking a fresh interest in IRAs.

Individual Retirement Arrangements (IRAs) hold trillions of dollars. These dollars are sheltered from taxes, for the most part until the owners decide to take distributions. The IRS discovered, however, that IRAs are a rich goldmine of unpaid taxes and penalties, because taxpayers are not following all the rules. Recently the IRS studied a sample of IRA owners over age 70½ and found a high percentage of those with large IRAs were not taking their required minimum distributions (RMDs).

Here’s what you need to know to avoid problems with the IRS.

Congress suspended RMDs for 2009 to help IRA owners who didn’t need the distributions to let their balances recover from the investment declines of 2008. But the suspension was for only one year, and there’s no indication Congress plans to suspend RMDs retroactively for 2010 or for any future year.

The IRS receives up to two reports from IRA custodians for each IRA with an owner over age 70½. One report is Form 1099-R that reports the amount of distributions for the year from every IRA. The IRA owner also receives a copy of this form.

The other report is Form 5498. This provides the IRS with basic information about the owner of each IRA: Name, address, Social Security number, IRA balance, and whether an RMD was required for the year.

In a recent study the IRS compared the two forms for a sample of taxpayers and found a high percentage whose 5498 indicated an RMD was required did not also have a 1099-R filed. The lack of a 1099-R indicated the IRA owner failed to take an RMD. Further investigation revealed that a number of the IRA owners hadn’t broken the rules.

5 Ways Retirement Tax Breaks Will Change in 2011

Earlier in the week the IRS announced the adjustments to pension plan limitations in 2011, which will have an impact on a handful of retirement plans popular among American taxpayers. US News.com put together a list of the top five retirement tax breaks that will be affected by the IRS' recent announcement. You can find a few items from their list below, or the full text here.

401(k)s. The savings limits for employer-based retirement accounts are not increasing next year because inflation was too low to trigger an increase. The cost-of-living index used to calculate increases in 401(k) savings limits is currently greater than it was in 2009, but it is still less than the measurement for the third quarter of 2008. The maximum amount investors can contribute to 401(k)s will not be raised until the September inflation measurement climbs above where is was in 2008. Contribution limits cannot be reduced under current law.

Traditional IRAs. Certain income ceilings determine who is eligible for a tax break for contributing to an IRA. Individuals who have a retirement plan at work can contribute the full amount to an IRA until their modified adjusted gross income (AGI) reaches $56,000. The amount eligible for tax deferral is then gradually phased out until income reaches $66,000 in 2011, the same amount as this year. However, married couples filing jointly will get higher income limits next year. For a spouse who participates in a retirement plan at work the income phase-out range will be $90,000 to $110,000 in 2011, up from $89,000 to $109,000 this year. For IRA owners who do not have access to a retirement account at work, but are married to someone who does, the deduction will be phased out if the couple’s income is between $169,000 and $179,000, up from $167,000 and $177,000 this year.

Roth IRAs. More high income retirement savers will be eligible to make Roth IRA contributions next year. Married couples filing jointly can contribute to a Roth IRA until their AGI reaches between $169,000 and 179,000 next year, up from $167,000 to $177,000 in 2010. The AGI phase-out range for singles and heads of household will increase from $105,000 to $120,000 this year to between $107,000 and $122,000 in 2011.

Saver’s credit. The AGI limit to get the saver’s credit will be $56,500 for married couples filing jointly in 2011, up from $55,500 in 2010. For heads of household the income limit will increase from $41,625 this year to $42,375 in 2011. Single people and married individuals filing separately can earn up to $28,250 and still get the saver’s credit, up from $27,750 this year.

Continue reading at US News.com...

5 Ways to Get Your Retirement Back on Track

A lot of Americans have seen their retirement plans interrupted in the bad economy. According to CNN, nearly half of the taxpayers in this country worry they will not have enough money to retire comfortably. This is up from 29% in 2007, a report from the Employee Benefit Research Institute found.

But the truth is, you can still get to your destination. "Not everyone is going to be able to retire exactly the way they want," says Denver financial planner Mark Brown. "But I talk to people all the time who overestimate the scope of their problem and underestimate their ability to do something about it."

Here are a few strategies for navigating five of the most common retirement roadblocks.

Roadblock #1: You're carrying a big mortgage

The problem: It used to be that Americans aimed to cross into retirement free of debt. But if you're in your fifties or sixties, chances are you aren't planning a mortgage-burning party anytime soon. The Joint Center for Housing Studies at Harvard says that 63% of homeowners ages 55 to 64 have mortgage or home-equity debt, up from 49% in 1989. In addition, a third of retirees carry credit card balances, reports the Federal Reserve. Such liabilities can be a dead weight in retirement -- you'll have to make the payments even if your expenses soar or your portfolio plummets.

Solution #1: Erase the debt if you can. Assuming you have cash savings in excess of the balances (besides emergency funds, that is), it usually makes sense to pay debts off around the time you retire. But zero out HELOCs and credit cards first. "You don't want a variable rate going into retirement," says Scottsdale financial planner Jacob Gold.

How 3 couples bust through retirement roadblocks

As for your mortgage, if you're two-thirds through the term, you're not benefiting much, if at all, from the interest write-off. And after taxes you're unlikely to earn more in risk-free investments than the cost of the debt, a recent Center for Retirement Research study found. That said, if you'd have to pull from tax-sheltered accounts to pay off the balance, you may want to consult a financial planner about whether doing so would be worth the tax bite.

Continue reading at CNN.com…

25 Best Places to Retire

The economic downturn has been especially difficult on retired taxpayers. Fortunately, there are some places in this country that are friendly to retirees. CNN Money.com put together a list of the 25 best places to retire at. You can find a section of the story below, or check out the full list here.

1. Durham, NC

Population: 223,284

% over 50: 25%

Median home price: $163,000

State income tax: 7.75%*

Where to take classes: Duke University

Durham would rank as a retiree Mecca even without Duke University's stellar lifelong-learning program. Residents enjoy four seasons -- but without them being too extreme. Homes are affordable, the area is dotted with golf courses and parkland, and the region is home to a renowned university medical center.

This former tobacco town also is a budding cultural haven. Duke's Nasher Museum of Art has a growing contemporary art collection. Concerts and Broadway hits, such as Billy Elliot and the Lion King, frequently make their way to the newly built 2,800-seat Durham Performing Arts Center.

2. Hanover, NH

Hanover, NH

Population: 8,516

% over 50: 25%

Median home price: $401,000

State income tax: 5%*

Where to take classes: Dartmouth College

New England is chock full of charming villages. But few are as welcoming to retirees as Hanover, home of Dartmouth College and its 20-year-old senior education program.

Outdoor enthusiasts can kayak on the Connecticut River or hike in the White Mountains. Winter, of course, brings 94 inches of snow on average, so residents make the most of the cold (five ski hills are within an hour's drive) or head south.

Continue reading at CNN Money.com…

Retirement May Mean a Lifestyle Downgrade

With the baby boomers reaching retirement age, many of them are looking forward to settling into a nice, comfortable retirement. However, a new report from the Employee Benefit Research Institute suggests that more than half of these baby boomers are at risk of having insufficient funds to pay for the full extent of their retirement expenses.

Nearly half of older boomers -- those now aged 56 to 62 -- and some 44% of younger boomers -- aged 46 to 55 now -- are at risk of not having sufficient income to pay for basic retirement expenses and uninsured medical expenses, according to the study.

The study, which assumed that boomers would retire at age 65, also found that lower-income retirees are most likely to run out of money after 10 and certainly 20 years of retirement, while higher-income retirees are least likely to run out of money.

41% of those with the lowest income are likely to run short of money after 10 years of retirement, and 57% after 20 years. Meanwhile, just 5% of those in the highest income quartile will run out of money after 10 years, and 13% after 20 years.

So, what to make of this study?

Run out of lifestyle, not money

In reality, most Americans don't run out of money, they run out of lifestyle. As they age and spend down their assets, they typically reduce their living standard.

Continue reading at Market Watch.com…

More States Woo Retirees With Tax Breaks

From Forbes.com:

Last month, even as they slapped a new tax on hospitals, raised dozens of user fees and eliminated a low-income tax credit, Georgia legislators passed income tax relief for one group: well-off retirees. For residents 62 or older, Georgia already exempts from its 6% tax all Social Security and $70,000 per couple of income from pensions, retirement accounts, annuities, interest, dividends, capital gains and rents. But in 2012, the exemption for couples 65 and older will rise to $130,000, and by 2016 all their retirement income will be exempt--a break Governor Sonny Perdue championed as a lure for well-heeled seniors.

If you're looking for a domestic retirement tax haven, Georgia is hardly the only place worth considering. Seven states--Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming--don't tax personal income at all. New Hampshire and Tennessee tax interest and dividends but not other income. The rest of the states have broad income taxes but give old taxpayers breaks, some quite generous. A recent study by Karen Smith Conway of the University of New Hampshire and Jonathan C. Rork of Georgia State calculates that retirees pay, on average, only half the state income tax of working folks with the same income.

That means the best tax locales aren't necessarily the same for retirees as they are for working stiffs. Some states, such as New Jersey, soak taxpayers of all ages (particularly affluent ones) with stiff income, real estate, sales and estate taxes. But others with a more moderate tax burden might compensate for having no income taxes with high real estate levies. New Hampshire, with no sales tax and a narrow income tax, has among the highest real estate burdens in the nation. Consider, too, the condition of local finances and prospects for tax hikes.

Income Taxes

The most common exemption among states with an income tax is for Social Security benefits; 27 states and the District of Columbia don't tax them at all while the rest provide a partial exemption, according to tax publisher CCH. Three states--Illinois, Mississippi and Pennsylvania--also exempt all private and public pension payouts, including withdrawals from individual retirement accounts. Kentucky exempts up to $82,220 per couple in pension and IRA income.

Five Rules For Inherited IRAs

Setting up an IRA for yourself can be confusing. However things can get even more complicated when you inherit an IRA. However, as this article from Forbes.com explains, with the right knowledge a family can stretch out the tax breaks of an IRA for decades. They even outline five basic rules for heirs who have inherited an IRA. I have included a few of the rules below, but if you anticipate inheriting a retirement account then I highly recommend going over the full list at Forbes.com.

1. First, do no harm.

If you inherit a retirement account, don't do anything until you know exactly what rules apply. With your own IRA you can take the money out and redeposit it in another IRA within 60 days without penalty. Not so an inherited IRA. All movement of money must be from one IRA custodian to another--be sure to specify a "trustee-to-trustee" transfer. Moreover, unless you've inherited from a spouse, you must retitle the IRA, including the original owner's name and indicating it is inherited, e.g., "Daddy Warbucks, deceased, inherited IRA for the benefit of Little Orphan Annie, beneficiary."

If two or more people are named as beneficiaries, ask the custodian to split it into separate inherited IRAs. That avoids investment squabbles and allows a longer stretch-out for the younger heirs.

2. Beneficiary forms rule.

The beneficiary form on file with the custodian of an IRA controls both whoever inherits the IRA and its ability to be stretched out. If someone other than a spouse is named as heir, they must begin taking distributions from the account by Dec. 31 of the year after inheriting, but they can draw these out over their own expected life spans, enjoying decades of income-tax-deferred growth in a traditional IRA or tax-free growth in a Roth IRA. To give your heirs maximum flexibility, name both primary and alternate individual beneficiaries--say, your spouse as primary and kids as alternates or your kids as primary and grandkids as alternates. Your primary beneficiary then has the option of "disclaiming" or turning down the account, enabling it to pass to the younger alternate.

Continue reading at Forbes.com…

How to Find a Low-Tax Place to Retire

For most of us “retirement” means lounging in warm weather, relaxing, and never having to work again! None of us want to pay higher taxes now; so why would we in our retirement?

USnews.com shares an article that goes over major taxes and tax breaks you should take into consideration when deciding to retire: Social Security, Pensions, Income Tax, Property Tax and Sales Tax. Read what they had to say:

Social Security. Most states no longer tax Social Security benefits. Some 35 states don't require residents to pay tax on Social Security income, according to an analysis by tax publisher CCH. Missouri and Iowa are in the process of phasing out their Social Security taxes. And Kansas residents with adjusted gross incomes of $75,000 or less are exempt from paying taxes on their Social Security checks.

Pensions. The tax treatment of pension income varies considerably from state to state. Some states, such as Pennsylvania and Mississippi, exempt all pension income from taxes. Other states exempt a portion of specific types of pension income. In Michigan, for example, all federal pensions and public pensions from specific states are totally exempt from tax. Private pensions were tax-exempt up to $45,120 for individuals and $90,240 for couples in tax year 2009. "When the economy was doing well, pension tax thresholds were moving out further and further, but now we're seeing a freeze on these threshold amounts," says Kathleen Thies, a CCH state tax analyst.

Income tax. Retirees who haven't saved enough to finance their desired lifestyle may need to work during their golden years. If your retirement plans include a part-time job, take a look at state income taxes. Seven states have no income tax: Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming. And two states, New Hampshire and Tennessee, tax dividend and interest income only.
Great advice: While states without an income tax can seem like an obvious choice for retirees, it's also important to look at property and sales taxes, which tend to be higher in income tax-free states. "If you're thinking of retiring in four different places, figure out the total tax cost in all the places and then you can make an effective comparison," advises Paul Erickson, a professor of accounting at Baylor University. "The property tax and sales tax could be higher than what you paid on income tax."

Property tax. The median property tax paid in the United States in 2008 was $1,897, according to a Tax Foundation analysis of Census Bureau data. But taxes paid ranged from a median of just $188 in Louisiana to $6,320 in New Jersey. "Most states give residents over a certain age some type of a break on their property taxes," says Rob Shrum, state affairs manager for the Tax Foundation. Some counties in Florida, for example, allow permanent residents age 65 and older within certain income limits a tax exemption of up to $50,000 of the value of their primary residence. Widows and widowers also get an extra $500 property tax exemption in Florida. Contact a state's department of revenue to inquire about property tax breaks for seniors.

Sales tax. Many cash-strapped states have been increasing their sales tax to raise needed funds. Seven states increased their sales tax rate in 2009, according to Vertex Inc. research. The average sales tax rate in the United States now stands at 5.5 percent. It may also be worth looking at the types of items and services that sales and excise taxes apply to. "Typically elderly people will be purchasing less cars or furniture or big-ticket items than someone with a growing family, but they still need to purchase food and clothing," says John Minassian, vice president of content development for Vertex Inc.

There are five states that levy no sales tax: Alaska, Delaware, Montana, New Hampshire, and Oregon. States with low taxes for shoppers include Colorado (2.9 percent) and Georgia, Hawaii, Louisiana, New York, and Wyoming (all 4 percent). California has the highest sales tax in the country at 8.25 percent in 2010.

Saving For Retirement On a Part-Time Salary

These days, many Americans assume that saving for retirement is something that only older taxpayers should worry about. However, as I have explained before, you are never too young to begin planning for your future.

Earlier in the week, a college student working only part-time hours wrote into Money Magazine asking if they should start contributing to an IRA. Check out the authors answer below courtesy of CNN.com.

Yes, you almost certainly can. And if you can swing it, you probably should, since contributing to an IRA early in life can be an excellent way to lay the foundation for a more secure financial future.

That's true, by the way, not just for someone in your position, but for high school and college grads starting new jobs, not to mention students with summer gigs.

Although the rules governing IRA contributions can get a bit convoluted (as this IRS publication makes painfully clear), the gist is that as long as you have earned income, you can contribute as much as you make in a given year up to a maximum of $5,000. People 50 and older can do an extra $1,000 catch-up contribution, but that's not going to apply to many college students.

So, for example, if you earn $5,000 or more from your part-time work, you can salt away the max. If you're paid, say, $3,000, then you can contribute up to three grand.

Just to be clear, the dollars you contribute to an IRA don't have to be the same dollars you earn. Let's say, you earn $5,000, but after expenses manage to put only $2,500 into the IRA. If you can come up with an additional $2,500 from other sources, such as savings or a cash infusion from mom, dad or a kind relative, you can throw that money into your IRA account to get you to the $5,000 limit. Any parents looking to help their kids parlay a summer job into a leg up on their eventual retirement security may want to keep this in mind.

Continue reading at CNN.com…

How To Set Up Your First 401k

Retirement may seem decades away to younger taxpayers, but most financial experts actually say the best time to start saving for the future is in your early twenties. However, most taxpayers in their twenties are usually focused on school, their first serious jobs, or even starting a family. Fortunately, MSN Money recently published a helpful article on how to setup your first retirement plan, and I highly recommend anyone without a 401k or IRA check it out below.

Start early

Money you tuck away for retirement in your 20s has decades to compound. Make savings automatic, beginning with your first paycheck, and try to ramp up your contributions whenever you get a raise.

"Our goal for new employees just getting into the work force is we want to get them to save 10% of their gross wages as soon as possible," says Mark Berg, a certified financial planner and the president of Timothy Financial Counsel in Wheaton, Ill. Those who can't afford 10% right away can start smaller. "We try to target 4% to 5% initially and then as they get raises, we'll add a percent or two to the amount they are putting in," says Berg.

If your company has a waiting period before new employees are allowed to join the 401k plan, make note of that date and begin participating as soon as you are eligible.

Get a 401k match

An employer match is a powerful incentive to participate in a 401k. A company match of 50% of contributions up to 6% of pay for an employee earning $35,000 annually can boost that worker's retirement savings by $1,050 each year.

If your employer doesn't offer a 401k match, it's still worthwhile to invest in a 401k for the tax break. Young employees can contribute up to $16,500 to a 401k in 2010 and won't pay income taxes on the amount contributed until retirement.

Consider a Roth 401k

Some companies offer a choice between traditional and Roth 401k's. Traditional 401k deposits give you a tax break in the year you make the deposit, but income tax is due when the money is withdrawn. Roth 401k contributions are made with after-tax dollars, and withdrawals in retirement are tax-free.

The Roth option can be a good deal for young people who are currently in a low tax bracket. "People who potentially will retire in a higher tax bracket than they are in right now should use a Roth," says Clark Kendall, a certified financial planner and the founder of Kendall Capital Management in Rockville, Md.

What to Consider Before Retiring Overseas

Ever considered living abroad in your golden years? Many Americans not only consider it, they actually do it, buying beautiful homes in great climates overseas and never looking back. Some even find lower health care costs to boot. However, because of the global economic and political changes, retirement hot spots across the globe may be losing their luster.

As New York Times article points out, although places like Ireland, Thailand and Costa Rica were the most recommended countries in the past to retire, they are not any longer. But why? Well, Ireland is said to have a high cost of living, Thailand is said to have increasing anti-foreign sentiments, and the Costa Rican capital, San José, has growing crime rates.

Retirees are now urged to consider places like Panama, Uruguay, and Argentina – as well as France, Croatia, and Malaysia when looking for a place to settle during retirement. “It has very good tax breaks, although the cost of living can be high,” Ms. Hannah Coppersmith, managing director of Pure International, a global property company in London said.

Wondering how you would be able to afford to live abroad when you retire? Kathleen Peddicord of Panama City, Panama, and author of “How to Retire Overseas” recommends selling nearly everything you own. “Seriously. Think about it this way. If you were to liquidate every asset you have, where would that leave you? What lump sum of capital would you net?” Then, the next step is to take a look at your investments. What level of yields and dividends might those give you on a monthly basis?

Some countries are quite affordable. “In Panama, for example, your rent could be $1,500 a month for a two-bedroom apartment in a nice building in Panama City with a doorman and a pool,” Ms. Peddicord said, “or it could be $200 a month if you choose instead to settle in a little house near the beach in Las Tablas, a beautiful, welcoming region.”

Read the full article here for more tips and information.

Get the most from your Social Security

The Social Security system has been on the minds of many people these days. It has been speculated, for many years now, that Social Security won’t last. With an estimated 77 million Baby Boomers on their way to retirement, something simply has to be done to ensure that those that have contributed to social security receive their share in full.

Social Security is a mandated supplemental retirement system in the Unites States that was established in 1934 as a part of Roosevelt’s New Deal. The intent of the program is to ensure a threshold sustenance level to senior citizens who previously faired way below poverty during the Great Depression. (http://www.wisegeek.com/what-is-social-security.htm).

See six tips from WalletPop.com that can help get you more from Social Security when you retire.

7 Ways Moms Can Boost Their Financial Security

As Mother’s Day quickly approaches, I thought it’d be a great time to share this article from Klipinger.com with the fantastic moms and women out there. Take your finances into your own hands and take the advice.

1. Schedule a money date with your spouse and talk things out. Many women want their spouses to talk about money issues more, so try starting that conversation yourself! Write out your financial goals together and see whether or not you’re on the same page.

2. If you aren’t saving for retirement already, start. Small amounts set aside now will compound and grow over the years. The earlier you start, the more time your savings have to grow. If you are working, sign up for your company’s retirement plan. Aim to contribute at least enough to qualify for your employer’s match. It’s free money! In 2010 you can contribute up to $16,500 to a 401(k) or other employer-based retirement account, or $22,000 if you’ll be 50 or older by year’s end.

Never cash out your company plan if you switch jobs. Instead, roll the money over to an IRA or new employer plan so that you continue saving and do not get hit with tax penalties.

3. No company or employer plan? Then set up your own retirement account, such as an IRA. If you’re a stay-at-home mom, you can have an IRA so long as your spouse is employed. In 2010 he can contribute up to $5,000 to an account for you ($6,000 if you’re 50 or older) in addition to his own $5,000 contributions. This doubles the tax breaks to you as a couple!

4. Life insurance is always advised. Once you have children it should become a priority so your children do not suffer financially if you’re not around any longer. The rule of thumb? Coverage should equal eight to ten times your annual household income, including any benefits covered by your employer. Buying term life insurance is said to keep things simple and inexpensive. Several hundred thousand dollars’ worth is just a few hundred dollars per year.

Already have life insurance? Remember, you’ll need to re-evaluate your coverage periodically to ensure it still meets your current life circumstances. For instance, you may need more coverage if you have another child but less when the children are grown and out of the house.

5. Write a will. When you don’t have a will, your state’s one-size-fits-all estate plan kicks in and you might not agree with it. The state will also choose the guardian of your children. With a will, you can make these decisions, divide your property and even design trusts for your children for specific purposes. Review your will after the birth of additional children.

6. Make sure you specify a guardian. If you don’t choose a guardian for your children officially, then the choice you informally made with a friend or family member won’t stand up legally. Avoid any hassle or expensive court battle by naming a guardian in your will.

7. Review your beneficiary designations on insurance policies, IRAs, 401(k)s, and other retirement plans such as pension and profit sharing plans at various life stages. The assets in these accounts go directly to whomever you have named as a beneficiary; these are not covered by your will. If you handle these issues now, you won’t have devastating consequences if something was to happen.

Read the full article here.

Paring Back So You Can Retire Comfortably

According to a 2010 survey on retirement confidence, about 70% of workers plan to work for pay during retirement. In today’s poor economic conditions many Americans have no idea how to plan for retirement. Fortunately, SmartMoney.com has published a great article explaining how you can make reductions in your sending now to help save for your future. Check out a section of their useful article below.

Trim your housing costs

Consider trading down to a smaller home. Doing so can not only allow you to plow your gains (if you have them) into a retirement savings account, it can also help shrink your taxes, utility bills and home maintenance costs, says Jean Setzfand, the director of financial security for AARP. If you plan to buy rather than rent, which might also deliver some savings in this market especially, be realistic. Purchase only what you need, not what others will buy, she says. “A house is not an investment.”

Keep taxes in mind

Consider moving to a place that offers tax advantages, suggests Mark Kennedy, the president of Kennedy Wealth Management, an investment advisory firm in Woodland Hills, Calif. Alaska, Florida, Nevada, South Dakota, Wyoming and Washington, for example, don’t have state income taxes. New Hampshire and Tennessee tax dividend and interest income only, while Oregon, Alaska, Delaware, Montana and New Hampshire don’t levy a sales tax. Further, he adds that homeowners over the age of 55 who move within the same county in California can carry their property tax basis with them as long as the new home is of equal or lesser value than the former home. (Note that this transaction is only allowed once in a single individual’s lifetime.)

Eliminate pricey debts

Although some debt such as a mortgage and student loans can offer valuable tax deductions, other debts are just plain worthless. Before you can even begin to save, you have to eliminate high priced debts such as credit cards or payday loans, says Adam. Even mortgages can keep you lodged in a hole, she says. “Start paying down extra on mortgage or your credit cards each month, then you can really save.”

Continue reading at Smart Money.com…

Tax Issues Confront Retirees

Although retirement is a time to relax, planning for your retirement can be stressful and difficult. However, by doing a little research you can make the most out of your retirement. Market Watch has put together a helpful article explaining tax issues related to retirement, and what states are better to retire in. You can find a snippet of their article below.

As you enter retirement, probably the largest and most daunting expense you encounter will be taxes. And we're talking not just of a benign single item of expense, but quite possibly many different kinds of levies. Each one of our 50 states can enact and enforce state and local taxes by the dozen, as well as property taxes by the hundreds, and countless more.

These taxes can vary so much in size and scope from place to place that they sometimes become key factors in your decision of where to retire -- indeed, whether you choose to retire at all.

People who retire to low-tax or no-tax states have an economic advantage over those who do not. But only nine states have no broad-based state income tax. Those states are: Alaska, Texas, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Washington and Wyoming. (In New Hampshire and Tennessee, income tax is limited to dividends and interest income.) See this Federation of Tax Administrators page for more details on state tax rates.

One means to determine which state is the least costly in terms of total taxes is to check a study called "Tax Freedom Day." That's the day on which the ordinary American's total federal, state and local tax bill is fully paid from his or her earnings for the year to date. Ostensibly, this is the day you stopped working for the government and started working for yourself; that is, the day you earned enough to pay your federal, state and local taxes and are now starting to make money you'll be able to spend on things for yourself. For more on Tax Freedom day, visit the Tax Foundation site.

In recent years, states posting the worst Tax Freedom Days; that is, the highest overall tax bills have included Maine, New York, Ohio, Minnesota and Hawaii. And states with the lowest overall taxes have included Alaska, New Hampshire, Delaware, Tennessee and Alabama.

Retiree Annuities May Be Promoted by Obama Aides

According to Bloomberg.com, the Obama administration is considering how the government can encourage workers to turn their savings into guaranteed income streams following a collapse in retiree accounts when the stock market plunged.

The U.S. Treasury and Labor Departments will ask for public comment by next week on ways to promote the conversion of 401(k) savings and Individual Retirement Accounts into annuities or other steady payment streams, according to Assistant Labor Secretary Phyllis C. Borzi and Deputy Assistant Treasury Secretary Mark Iwry, who are spearheading the effort.

Annuities generally guarantee income until the retiree’s death, and often that of a surviving spouse as well. They are designed to protect against the risk that retirees outlive their savings, a danger made clear by market losses suffered by older Americans over the last year, David Certner, legislative counsel for AARP, said in an interview.

Why It May Pay To Convert to a Roth IRA

From the Wall Street Journal:

Investors and financial advisers are preparing to take advantage of a new tax law that makes it easier to gain access to Roth IRAs—even if it means breaking a sacrosanct rule about Roth conversions.

Starting, Jan. 1, the $100,000 income limit disappears for converting traditional individual retirement accounts and employer-sponsored retirement plans to Roth IRAs, one of the biggest changes on the IRA landscape in years. Roths, of course, have long been viewed as one of the best deals in retirement planning; after investors meet holding requirements, virtually all withdrawals are tax-free.

Just how many investors will make the leap is unclear. Converting to a Roth can be expensive; it requires paying income tax on all pretax contributions and earnings included in the amount converted. What's more, financial advisers have long argued that converting makes sense only if an investor can pay the tax from funds outside the IRA itself - an admonition that seemingly limits the strategy to the very wealthy.

That said, some financial advisers say growing numbers of their clients are leaning toward a Roth conversion, even if they have to tap their traditional IRAs to pay the taxes. The primary reasons: new, contrarian analyses of taxes and conversions—and a desire to gain more control over nest eggs in the years ahead. With a traditional IRA, investors must begin tapping their accounts after reaching age 701/2, which increases taxable income. With a Roth, there are no required distributions, giving retirees more flexibility in managing their investments and cash flow.

U.S. State Revenue Fell 16% in Fiscal 2008, Census Bureau Says

From Bloomberg.com:

U.S. state government collections fell 16 percent to almost $1.7 trillion in fiscal 2008 from a year earlier, while spending increased 6.2 percent, according to the U.S. Census Bureau.

The biggest drop came in so-called insurance trust revenue, which slid $377.7 billion, or 73 percent, the federal agency reported today. Such funds include public employee retirement systems, unemployment compensation and worker compensation funds, many financed with payroll taxes and other worker contributions, according to the bureau.

Spending exceeded $1.7 trillion for the combined states, according to the report. Education, at $546.8 billion, public welfare, $412.1 billion, and highways, $107.2 billion, consumed almost two-thirds of the outlays, the Census Bureau said. State records showed lottery sales rose 1.8 percent from the previous year, to $77.3 billion.

Eleven states spent more than one-fourth of their total expenditures on public welfare such as health care and assistance to the needy, led by Tennessee at 33 percent, Maine at 31 percent and Rhode Island at 30 percent.

3 Tips for a More Secure Retirement

Planning for retirement is no simple or streamlined task. However, one of my favorite bloggers, The Motley Fool, posted 3 great trips this morning to help anyone with their retirement planning. You can check out a segment of his article below, or click here to read the full version

Successfully planning for your retirement takes a lifetime of hard work and dedication. After going to all that trouble to provide for your golden years, the last thing you want is to blow it by making mistakes when the time comes to start spending down your retirement savings.

IRAs, 401(k) plans, and other methods of saving for retirement give you valuable tools that you can use to boost the value of your portfolio. When you start taking money out of these accounts, though, you need to remember that there's more involved than just asking for a check. Smart planning can make a huge difference in how much of your hard-earned money you actually get to keep.

How the IRS gets its due

Some of the best features of retirement accounts are their tax benefits. Traditional IRAs and 401(k) plans, for instance, give you a current tax deduction that can save you thousands in income taxes year after year.

After you retire, though, it's payback time for the IRS. Every time you take money out of a traditional IRA or 401(k), you create taxable income that will usually increase your tax bill. In addition, if you decide to retire before you turn 59 1/2, then an additional 10% penalty may apply if the withdrawal doesn't qualify for one of many exceptions to the penalty rules.

Given this, many investors choose to go with Roth IRAs if they can. But even with Roths, you'll want to be careful: Once you take money out of the Roth, it no longer generates tax-free income for you.

New IRS Retirement Plan Navigator Aims to Help Small Businesses

According to their newest press release, the IRS has created a new Web-based tool to help small business owners determine which tax-favored pension plan best suits their needs and how to keep their plans in compliance.

The IRS Retirement Plan Navigator is intended to provide employers with an easy-to-use guide that focuses on three areas: choosing a plan, maintaining a plan and correcting a plan.

By using the navigator, employers may find that choosing and maintaining a pension plan is not as daunting as they thought. Some plan types are less costly and easier to establish than others.

The navigator does not suggest which plan may be best for a specific employer but it does lay out the options to allow them to choose one that best fits their situations. The navigator includes a side-by-side comparison of pension plans and their requirements.

The navigator provides a checklist and suggested resources for maintaining compliance. Pension laws change frequently. Employers can minimize problems by doing a once-a-year review to ensure they maintain compliance.

The IRS also recognizes that mistakes can be made unintentionally, and many errors can be corrected without notifying the agency. The navigator offers suggested options to employers seeking to correct errors and bring their plans back into compliance.

Although the Retirement Plan Navigator is aimed at small business owners, it also can help mid-size businesses review their options as well. Individuals who want to better understand their employer’s plan may also find it of use.

The Web-based guide will be kept up to date as pension laws and regulations change.