Personal Financial Planning Retirement Issues "The time to repair a roof is when the sun is shining." - John F. Kennedy The time to plan for your retirement is now. Many people are confused about their living costs after they retire. Financial advisers frequently use the rule of thumb that people will need 70% of their pre-retirement income after they retire. But this number may be inflated. Most people will realize significant savings because: Mortgages are usually paid up. Transportation expenses to go to work are eliminated. Child care expenses should be finished. Tax rates are usually lower. The only expenses that tend to rise after retirement are medical expenses, but the increase is usually offset by savings in other areas. Therefore, in the usual situation, retirement income equal to about 60% of the pre-retirement income should not require a reduction in living standard. Many middle-age Americans are worried about their retirement. In a recent survey of 1,000 randomly selected individuals aged 30 to 59: 22% admitted that saving for retirement would be their greatest financial concern in the next 5 years. 36% indicated that their major retirement income source would have to be their company savings or investment plan. Only 17% expected to rely entirely on their company's pension plan for their retirement income. We deal with this and many other aspects of retirement when clients seek our help with their financial planning. Fun In The Sun This Summer as the pace slows a little and families are spending time on vacation, keep in mind some tax planning tips that may help recover the costs of your summer fun! Company picnics - Many companies plan a summer outing or a picnic for their employees. If this is your tradition, remember that the outlay is a tax deductible business expense, and your firm does not need to comply with the usual entertainment deduction rules that require a business discussion before, during or after the event, so long as the outing or picnic is primarily for your employees. Vacation homes - Don't overlook the significant tax breaks available if you own a vacation home that you rent out. You can rent a vacation home for fewer than 15 days per year without having to report the income. This makes for an ideal source of tax-free income. If you rent it for a longer period, you will have to report all of the income, but you will also be entitled to deduct such rental expenses as depreciation, repairs, insurance and utilities, considerably reducing your income and taxes from rental. Conventions/ Business Trips - If you have a convention or business trip on your schedule, you may be able to combine your trip with a vacation and write off most of the costs. Here are some of the basic rules: - If the trip is primarily for business, you can deduct the cost of the travel to and from the convention lodgings, convention fees and 50% of your meal expenses during the business portion of the trip. Extra-curricular activities while at the business destination are not tax deductible. - If a considerable portion of the trip is spent traveling, the IRS may challenge your write-offs claiming the trip was primarily for pleasure. Thus, it is important to maintain a record of all of your business activities including an official record of the sessions you attended at the convention. - If your spouse accompanies you, you will not be able to deduct his or her expenses unless there is a business purpose for the spouse's presence and the spouse is an employee of the taxpayer or the taxpayer's employer. Fortunately, you will still be able to deduct all of your costs, and there will be no additional costs for a car rental, and just a small additional non-deductible cost for the hotel room (double occupancy). Also, if there is business entertainment in the evening at which the spouse is present, the spouse's meal expenses are tax deductible business expenses. - There are special rules governing tax deductions for trips overseas and for the cost of cruise conventions and foreign conventions. Many clients meet with us before departing on combined business-vacation trips to determine the tax rules and the record-keeping requirements.