November 5, 2009
Vol 2, Issue 11
Jean Keener
Jean Keener
We're at that time of the year where holidays happen in quick succession.  Leaves are turning and we're benefitting from a string of perfectly beautiful fall days in Texas.  I hope you're finding time to enjoy it!
October was a bumpy month in the stock market.  We had the nice psychological victory of the Dow closing above 10,000 for a handful of days -- first time since early last October.  But when the month was over, the S&P 500 ended about where it started.  We're now up  about 15% for the year, and there's of course still a great amount of uncertainty with jobs and the economy. 
I share this monthly stock market information with you because we get inundated by "market news" every day and suggestions on a broad range of possible reactions or meanings.  It's rarely put into a context that supports our long-term financial strategies.  For long-term investors, it's helpful to be aware of the big-picture condition of the markets, but not desirable for us to listen to all the noise surrounding the daily fluctuations.  The "noise" can cause frustration and reactionary decision making, versus thought-out strategic implementation of our plans. 
In this newsletter, we have year-end tax planning tips, a reminder on an upcoming Texas Tomorrow Fund deadline, early retirement funding techniques, and more.  As always, feel free to e-mail me at with requests for newsletter topics you'd like to see covered.  Thank you, and Live Well.
In This Issue
2010 Retirement Plan Limits
Year-End Tax Planning
Funding Early Retirement
Texas Tomorrow Fund Deadline
In the News
Gift Idea: Financial Planning
Join Our E-Mail List!
Quick Links
Our Services
2010 Retirement Plan Contribution Limits
Retirement Plan Contributions Limits Unchanged for 2010Good news!  Most of the retirement plan contribution limits for 2010 didn't change.  Why is this good news?  There had been some concern earlier this year that negative inflation data for part of the year would actually cause these limits to be reduced for 2010.  But the IRS released the official limits on October 15, and there was no reduction.
Just to review, here are some of the most common limits: 
  • 401(k) / 403(b) / 457(b) / TSP: $16,500 (plus $5,500 catch-up for those 50+)
  • SIMPLE Plans: $11,500 (plus $2,500 catch-up for those 50+)

The definition of highly compensated and key employees, maximum compensation for purposes of a qualified plan, and most other limits also did not change.

 As we near the last couple months of the year, it's a good idea to double-check your withholding and make sure you're on track to contribute the desired amount.  You can calculate this by looking at the number of paychecks left, how much you're contributing each paycheck and your total contributed year-to-date to see if you need to raise or lower your contributions for the remainder of the year.  If your employer matches, it's important not to max out early and miss out on the match on the last couple of paychecks.
Year-End Tax Planning Checklist
Year End Tax Planning ChecklistReviewing your tax situation for the year when you still have time to do something about it is always a good idea.  You have many more options to affect your tax liability by acting before the year ends.  This year, it's still important to review all the regular opportunities available every year, but we also have many unique opportunities for 2009 that can save you additional money.
Here are some of the unique opportunities for 2009
Required Minimum Distributions suspended for 2009  - If you already took an RMD for 2009, you may be able to roll over the RMD to the same (or to a different) IRA or eligible retirement plan-you generally have until the later of 60 days from the time you took the distribution or November 30, 2009.

Roth IRA 2010 conversions - It's worth looking ahead to 2010 when special rules will apply to Roth conversions.  These rule changes might influence your actions now by planning to defer deductions to offset future taxes or by making non-deductible traditional IRA contributions now in anticipation of converting them later.  Click here to read my blog post on 2010 Roth conversions. 

 Depreciation rules for 2009 allow an additional 50% first-year depreciation deduction for qualifying property purchased for use in your business on or before December 31.  In lieu of depreciation, Section 179 deduction rules allow for the deduction, or "expensing," of up to $250,000 of the cost of qualifying property placed in service during 2009. Currently, that limit is scheduled to drop to $125,000 (adjusted for inflation) in 2010.

A tax credit of up to $8,000 is available in 2009 for qualified first-time homebuyers (only homes purchased before December 1, 2009, qualify).

The first $2,400 of unemployment compensation received in 2009 is excluded from income for federal income tax purposes.

If you itemize deductions, 2009 is the last year you'll have the option to deduct state and local sales tax instead of state and local income tax (as the law currently stands).
Individuals who do not itemize deductions are able to claim an additional standard deduction of up to $500 ($1,000 for married couples filing jointly) for real estate property taxes paid for 2009, the last year this deduction will be available (as the law currently stands).
The temporary deduction for sales and excise tax relating to the purchase of a qualified new automobile, light truck, or motorcycle applies to vehicles purchased through December 31, 2009.
The above-the-line (maximum $4,000) deduction for qualified tuition and related expenses expires at the end of 2009, as does the above-the-line deduction for up to $250 in out-of-pocket classroom expenses paid by educational professionals.

Individuals age 70 or older have only until December 31, 2009, to make charitable contributions of up to $100,000 directly from an IRA to a qualified charity, without including the distribution in income. 
For a review of some of the regular year-end tax planning considerations available every year and special considerations for high income earners, click here to view the entire post on this topic on my blog.

Funding Early Retirement
Early Retirement Funding TechniquesMost are familiar with the magic ages of 59 when you can start withdrawing from retirement savings without paying the 10% IRS penalty and 62 when you can start taking social security.  But sometimes retirement comes before these ages either voluntarily or involuntarily, and you may need income.  In those situations, many are not aware that you still have options to tap your retirement savings without penalties.  
The first option is available if you are at least age 55 and you stop working for your employer.  If your employment terminates during or after the year you turn 55, you are eligible to start drawing funds from that employer's 401(k) without penalty.  If you have multiple retirement accounts, this exception doesn't apply to all of them.  It only applies to those employer retirement accounts where you "separate from service" after turning 55.  If you roll the employer plan funds into an IRA, the exception also no longer applies.  For qualified public safety employees who take a distribution from a government defined benefit plan, this exception kicks in at age 50.
 Another option is called "substantially equal period payments" or 72(t) distributions.  You can start taking funds from your retirement accounts (401(k), IRA, 403(b), etc.) at any age with this option, although it doesn't apply to any employer retirement plans when you're still working for that employer.  To use this option, you are required to begin taking a "substantially equal" amount each year and continue without variation for at least 5 years or until you reach age 59 (whichever comes later).  You have a choice of 3 different calculation methods of your payment.  Once you start, you are committed to using the same method for the duration of the payments, with the exception of one adjustment allowed from two of the methods to the third one. 

 The IRS is quite picky about the precise calculations of 72(t) distributions and imposes steep penalties for any mistakes.  An error in one year can cause back-penalties on all previous distributions taken.  So you really need to consult a professional to have your distributions calculated.  And once you start, you absolutely have to stick with the program.

With either of these options, it's important to look at the big picture of your overall retirement funding.  Starting to withdraw from your savings too early can result in a significantly reduced standard of living later on, or it may be just fine in your situation.
Of course, you will still owe taxes on any distributions taken from tax-deferred accounts, and it's a good idea to plan for those taxes when considering these strategies.
Texas Tomorrow Fund Deadline Rapidly Approaching
Texas Tomorrow Fund DeadlineFor participants in the Texas Guaranteed Tuition Plan (also known as the Texas Tomorrow Fund) an important refund deadline is approaching.  Any refund requests received before November 30 will be processed according to the current rules.  The current rules allow for a refund of the original contribution plus earnings based on the rate of tuition inflation for a child who is age 18 or older.  For those under 18, an actuarial value is calculated based on the date you bought the contract, the number of years until your child graduates from high school or turns age 18, and the number of payments made compared to the total number of payments required.   After November 30, the new rules allow for only a return of the contributions, less expenses.  Big Difference!  
If you bought into the Texas Tomorrow Fund and your child plans to attend an accredited school in Texas, this change likely doesn't affect you.  You still have their tuition costs locked in and you have a terrific guarantee that no matter how high tuition goes, the plan credits you purchased will cover the costs.  So you really wouldn't want a refund.
However, if your child plans to attend school out of state or not attend college at all, you may wish to consider taking action now.  In this case, you have several options. If this is your situation, visit for information on this important decision.
In the News
I was interviewed by Personal Finance Columnist Pamela Yip with The Dallas Morning News on 2010 Roth IRA conversions last month.  Her article provides a good overview of the opportunity and is worth reading.  Click here to read it.
Give the Gift of Financial Planning
 As we approach the holidays, there may be someone in your life whom you'd like to provide the gift of financial planning.  Gift certificates are available for as little as single hour of financial planning, or I can work with you to customize an engagement for your loved one.  Contact me to discuss this directly, or click on this link to purchase a gift certificate online.  After purchasing online, your gift certificate will be mailed to you in plenty of time for the holidays.
I hope you found this newsletter informative.  KFP offers a free, no-obligation initial consultation to start the financial planning process for new clients.  To learn more or schedule a time, call 817-993-0401 or e-mail
Jean Keener, CRPC, CFDP
Keener Financial Planning

Keener Financial Planning is a fee-only financial planning and investment advisory firm working with individuals at all financial levels.
All newsletter content Copyright 2009, Keener Financial Planning, LLC.