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Answer to Reader’s Questions

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By Doug Awad

Treasury Extends Money Market Fund Guarantee:

On March 31, 2009, the Department of Treasury extended its temporary guarantee program for money market mutual funds through Sept. 18, 2009.

The program, which had been scheduled to expire on April 30, 2009, guarantees a participating money market fund’s $1 per share value through Sept. 18, 2009 for assets held in a fund as of the close of business Sept. 19, 2008, or to shares held in the fund when a guarantee payment is made, whichever is less. Investor’s cannot acquire Treasury protection for investments made after Sept. 19, 2008, and closing or transferring an account would mean losing the guarantee for those assets.

Deduction for State and Local Sales and Excise Tax on New Vehicles Purchase

The American Recovery and reinvestment Act of 2009 allows qualified motor vehicle taxes paid or accrued within the taxable year to be deducted as an itemized deduction, or as part of the standard deduction. A qualified motor vehicle means a passenger automobile, light truck, or motorcycle that has a gross vehicle rating of not more than 8,500 pounds. It also includes a motor home, acquired on or after Feb 17, 2009, and before Jan. 1, 2010.Individuals who itemize deductions will be able to deduct qualified motor vehicle taxes on their 2009 Form 1040, Schedule A. Qualifying individuals who do not itemize will be allowed to claim qualified motor vehicle taxes paid as part of their standard deduction. The deduction is limited to state and local sales and excise taxes attributable to the first $49,500 of the purchase price of a qualified motor vehicle, and is phased out for taxpayers with modified adjusted gross income between $125,000 for a single taxpayer or $250,000 in the case of a joint return. The deduction is also allowed for purposes of calculating alternative minimum tax (AMT).

Retirement Savings: Dealing with Investment Losses historically, the stock market has had its ups and downs. If you’re closing in on retirement or you’re already there, a dip in your savings due to the recent downturn in the market may affect how much you can safely withdraw and how long your savings will last. Investment losses can have a significant impact on your retirement savings. For example, on Oct. 22, 2007, the value of the S&P 500 was about 1500. On Oct. 20, 2008 it dropped to approximately 950 - a decrease of almost 38 percent. The S&P 500 would have to go up by about 60 percent to get back to 1500. If your retirement savings endures a similar performance, what can you do? How long will it take to recoup your losses? Here are some things to consider:

Postponing retirement lets you continue to add to your retirement savings which can offset losses caused by poor performance. Also, working allows you to delay withdrawing from your savings. That could allow more time for your retirement accounts to recover from investment losses.

If you delay applying for social security retirement benefits until your full retirement age compared to taking your benefits early. And, for each year you defer benefits past your full retirement age (between 65 and 67 depending on when you were born) to age 70, your benefit is increased by as much as 8 percent.

You may consider using some of your retirement savings to purchase a single premium immediate annuity (SPIA). The benefit of a SPIA is that it provides a steady income for either a fixed period of time or for the rest of your life, or for the joint lives of you and your spouse (subject to the claims-paying ability of the annuity issuer). However, a SPIA might not be for everyone. While the income is dependable, you may not be able to change the amount of income payments you receive or the duration once you have started. Consult with your financial adviser for help in deciding if a SPIA is for you.

The economic downturn is no reason to stick your head in the sand. While it may be hard to review those statement, especially if they’re filled with red numbers, take the opportunity to review your retirement savings plan and consider adjustments that might help you re-build your nest egg. If you have any questions, you can contact Doug by phone a 352 854-6866 or my email at Doug.Awad@raymondjames.com.

If you have questions, call Doug Awad at 854-6866, or e-mail Doug.Awad@raymondjeames.com. He is a resident on the 200 Corridor and his office is on 31st Road,