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New tax breaks help retirees save
Save money
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It’s no news flash that people who invest in the stock market saw their account values drop significantly in the last six months. For those already retired or fast approaching, the impact was especially painful since it will be much more difficult for their investments to recover value in time to fund their retirement.
However, there are recent positive developments for retirees looking to save money from an unlikely source: federal income taxes. The government recently made changes to the tax code that can help lower your tax load — and more are likely once details of the economic stimulus package gets ironed out.
One of the key benefits of participating in a 401(k), traditional IRA or other retirement plan where you contribute pretax dollars is that your contributions lower your taxable income; plus, your contributions and their investment earnings are allowed to grow tax-free until withdrawn after retirement when most people’s income, and therefore, their tax rate, is lower than in working years.
However, to ensure that you eventually do pay taxes on these funds, the IRS mandates that people over 70-½ must withdraw a minimum amount and pay taxes on them each year. (Roth IRAs are exempt since their deposits have already been taxed.)
Here’s how it works: If you were at least 70-½ in 2008, your minimum withdrawal for 2008 was calculated based on your account’s value on Dec. 31, 2007. Unfortunately, many people’s retirement accounts diminished considerably in 2008, so they were forced to take a withdrawal that is a much larger percentage than if it had been based on the account’s value at year’s end.
Although Congress didn’t amend the IRS code in time to suspend these mandatory withdrawals for 2008, it did pass legislation that will allow you to forego 2009 withdrawals if you wish. This means you have the option to leave your account untouched in hopes the market might improve and you can recover losses before having to withdraw the money and pay taxes on it.
The government also resurrected a popular tax-relief policy that allows people over 70-½ to donate up to $100,000 to charities from traditional or Roth IRAs without first having to declare the distribution as taxable income and then deducting the donation as a charitable contribution.
This policy, which expires at the end of 2009, particularly benefits people who don’t itemize deductions, since they wouldn’t otherwise receive a tax deduction for their charitable contributions. It also benefits retirees who want to contribute more than 50 percent of their income or who are affected by the high-income phase-out for itemized deductions.
To learn more about these rules, visit the IRS Web site (www.irs.gov). Given the complexity of these laws and penalties you might face for miscalculation, you may want to consult a financial planner or tax expert to map out your best strategy. If they don’t already have a planner, visit www.plannersearch.org.

Alderman directs Visa’s financial education programs. To participate in a free, online Financial Literacy and Education Summit go to www.practicalmoneyskills.com/summit2009.
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Visit with children a real eye-opener
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One of my favorite activities as a state senator is when I get to speak to students at our local schools. This year, I spoke to third-grade students at May Howard Elementary and Marshpoint Elementary in Chatham County and Button Gwinnett Elementary in Liberty County.
The students from each of the schools had been studying civics and were familiar with the three branches of government — executive, judicial and legislative. I explained my role as a senator in the legislative process and told the children how the citizen legislature in the state of Georgia works.
Presenting each of the schools with a Georgia state flag, I explained the three principles for which the state flag stands — wisdom, justice and moderation — and had them recite the pledge to the flag with me. 
The students at all three schools were bright, respectful and well-disciplined — a tribute to their families and especially to their teachers, who had prepared the students for my visit with ideas for great questions.
The students in Ms. Hutchinson’s class at Marshpoint Elementary were impressive in singing the preamble to the Constitution during my visit. What a great way to learn such an important part of our nation’s history — another wonderful example of the great job our teachers are doing.
I was delighted last week to receive thank-you letters from some of the students. Here are excerpts from a few of their letters:
 
Dear Mr. Carter,
Thank you for taking the time out of your busy schedule to come speak to us. I learned so much! I learned that there are two kinds of Pledge of Allegiances. That is pretty cool.
Do you travel all over the world do you? I really like that you taught me more about the three branches of government.
— Megan
 
Dear Sen. Carter,
Thank you for telling us about your job and your favorite thing about your job. I liked the Georgia state flag. I still have more questions. Do you have to work on Saturday and Sunday? Are you the only one who makes the laws?
Yours truly,
Ryleigh 


Dear Sen. Buddy Carter,
Thank you for coming and letting us have a little bit of your time. I want you to know that I learned something new. The Georgia pledge! Justice, wisdom and modesty! Thanks again!
— Liam
 
Dear Sen. Buddy Carter,
Thank you for coming and helping us learn more about the government and some of your job. Thank you for giving us a Georgia flag. It was fun when you came. Thank you for giving us some questions so we could answer them.
P.S. Did you ride in a limousine? I was going to ask you a question but then I forgot. But now I remember. How many rooms are there where you work? You can send me a note if you can.
Your friend,
Erin
 
I’m uncertain whether the students learned as much from me during my visit as I learned from them. One thing that I was reminded of was the honesty that comes from the innocence of childhood. I wasn’t quite sure how to interpret some of the questions, such as the one asked in this letter:
 
Dear Sen. Carter,
I loved your speech. Thanks for coming to our school. I think my favorite part was when we held the flag. It was so fun! I have a question: How many people voted for you?
Sincerely,
Shelly
 
I also was more than a little concerned about a recurring question in the thank-you notes that was posed to me during one of my visits by a beautiful, brown-eyed girl who, with a very serious look on her face, asked “Did you ever get re-elected be-fore?”


What a great group of young people! My faith and hope in our future has been reassured. What an amazing job our families and teachers are doing on a daily basis to support and encourage our next generation. Thank you for your dedication to teaching our leaders of tomor-row.

Sen. Buddy Carter can be reached at Coverdell Legislative Office Building (C.L.O.B.) Room 301-A, Atlanta, GA, 30334. His Capitol office number is 404-656-5109

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