Will you have enough money to retire? These tips for increasing your retirement income may help you leave the work force early…or at least make sure you live comfortably when you’re ready to retire! It’s never too early to think about achieving your financial goals…
Before the tips, a quip:
“Retirement: It’s nice to get out of the rat race, but you have to learn to get along with less cheese.” ~ Gene Perret.
I’d trade less cheese for less work any day of the week! If you’re thinking about retiring, read How to Love Your Retirement: Advice from Hundreds of Retirees). And if you’re worried you may not have enough money to retire comfortably, here are eight tips for increasing your retirement income from the CEO of Bills.com, Ethan Ewing….
Making Enough Money to Retire – 8 Tips for Increasing Retirement Income
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 to 50 percent of the contribution, depending on income, and is in addition to tax deductions for the contribution.
2. Remember that social Security recipients get a $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 this year. Of course, this tip for increasing your retirement income works best if you’re already getting Social Security benefits!
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 retire, this year 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. Even small tax breaks like this can help you save enough money to retire.
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 says. This tip for increasing your retirement income works best if you own your own home!
6. Buy a new home. For renters, now might be the time to buy because house 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 Making Home Affordable to learn about options for mortgage help. This tip for increasing your retirement income may involve adjusting your budget, bill payments, and mortgage payments.
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 says. 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. This tip for increasing your retirement income requires careful research, as it’s not beneficial 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.”
For more tips on making enough money to retire, read If You Want to Retire Early – How to Maximize Money for Retirement.
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