Tips on how to save more for retirement

Need to save more for retirement? Saving money doesn't have to be hard work. In fact, many successful savers have found simple ways to cut spending and increase their savings. Here are some tips to help you get started and stay on track.

* Figure out how much money you need for retirement. The number of years you have before retirement will help determine how much you will need to invest each month to reach your financial goal.

* Be realistic. Make sure that your savings goal is realistic. If your goal works out to 10% to 15% of your monthly income, it should be achievable. But you may need to cut expenses to free up savings.

*Pay yourself first. Try to treat your savings as your most important monthly bill. Write a check to savings first, or have your savings automatically deducted from your checking account or paycheck.

*Track expenses. Another way to maximize savings is to track your expenses for a few months. This is a great way to spot unnecessary or wasteful spending; it doesn't take much work to see potential cutbacks.

*Take control. When it comes to saving, think "control." For example, control the use of your credit cards. The amount you pay each month in finance charges could go to savings instead. Also, control the use of your ATM card. Get in the habit of giving yourself a regular cash allowance, and try to live with it.

The key to having enough money for a comfortable retirement is to become a serious saver. Start saving early, commit to saving regularly, and save as much as you can. No one ever retired regretting that they had accumulated too large a retirement fund.

Study reveals retirement concerns

A recent study conducted by Harris Interactive of 1,000 middle class individuals aged 25 to 75 revealed some interesting statistics about retirement attitudes.

Among the survey's findings:

* 37% of respondents say they don't expect to retire; instead they expect to work until they are too sick or die.

* 59% said retirement is not their top priority; their priority is paying day-to-day bills.

* 34% felt they would have to continue working until age 80 or beyond because they won't have saved enough to retire.

* 31% in the 40 to 59 age category say they have a retirement plan; 69% say they have no plan.

* Those who say they have a written plan say they have saved a median of $63,000 for retirement, which represents 32% of their retirement savings goal of $200,000. Those without a written plan say they have saved $20,000 or 10% of their goal.

* A third of those surveyed said that social security would be their primary source of income in retirement.

* 40% said a large unexpected health care expense was their greatest retirement fear; 37% said lower or no social security benefits was their biggest fear.

Health insurance tax credits are good medicine for small businesses

Small businesses may be missing out on an important new tax perk related to health insurance. And the stakes are even higher in 2014.

The Affordable Care Act provides a tax incentive for small business owners who pay at least a portion of their employees' health insurance. This year as much as 50% (up from 35% in 2013) of the employer's cost for worker health care premiums can be deducted as a tax credit. That's a dollar-for-dollar reduction in your 2014 tax bill. But as with most tax deals, you must meet certain requirements to qualify.

First, you must employ fewer than 25 full-time equivalent (FTE) employees. A half-time employee would count as a .5 FTE, so you must consider all workers in your calculation. The fewer FTE employees you have, the higher the tax credit percentage.

Second, the average annual wages of your employees must be less than $50,000. To make the calculation, you would take your total wages and divide by the FTE number you figured above. In most cases the owner's salary is not included in the formula.

Finally, the business owner must contribute at least 50% of the total cost for single coverage. Family coverage is not factored in. The policy must also be purchased through the Small Business Health Options Program, or SHOP to be eligible for the credit.

A few more wrinkles: if a business doesn't owe tax for the current year, they can apply the credit to past or future years. In addition, the excess of the employer's actual cost of health insurance over and above the credit received can still be deducted as a business expense. And the new rules also mean that small nonprofit organizations can receive a tax credit of up to 35% of their health insurance costs if they meet the above requirements.

Parents can cut taxes with child-related credits

Are you a parent? Give yourself some credit – a child-related tax credit, that is. Here are two that can reduce your 2013 federal income tax liability.

Child tax credit. The child tax credit applies if your dependent children were age 16 or younger at the end of 2013. The basic credit is $1,000 per child, though the amount you can claim may be less when you file a joint return and your income is more than $110,000 ($75,000 for other parents).

You may also qualify for the "additional child tax credit," which can generate a refund even if you owe no tax, and comes into play when your tax bill is less than the basic credit.

Child and dependent care credit. Did you pay a daycare or babysitter to take care of your child so you could work? You can claim a credit of as much as 35% of your expenses, up to a maximum of $1,050 for one child ($2,100 for two or more children). To qualify, your child must generally be under age 13. In addition, both you and your spouse must have earned income, unless one of you was attending school full-time.

You can claim both of these credits on your 2013 federal income tax return in addition to the $3,900 dependency exemption for each child. Contact us if you need more details.

Who must file a 2013 income tax return?

The rules for filing 2013 tax returns are straightforward for most people. Marital status, age, and income level are generally the determining factors. Here's a quick overview of the income levels at which a 2013 return is required.

*Single individual…..$10,000

*Single individual, 65 or older…..$11,500

*Married individual, separate return, regardless of age…..$3,900

*Married couple, joint return…..$20,000

*Married couple, joint return, one spouse 65 or older…..$21,200

*Married couple, joint return, both spouses 65 or older…..$22,400

*Head of household…..$12,850

*Head of household, 65 or older…..$14,350

*Qualifying widow or widower (surviving spouse)…..$16,100

*Qualifying widow or widower (surviving spouse), 65 or older…..$17,300

Different IRS rules govern filing for dependents, those who owe special taxes (e.g., self-employment tax), children under age 19 and noncitizens. Also taxpayers due a refund should file regardless of income level.

Tax strategies for charitable giving

Now that the holiday season has arrived, you might decide to step up your charitable donations to boost your deductions for 2013. Here are six timely strategies.

1. Audit-proof your claims. The IRS imposes strict substantiation rules for charitable donations. In fact, you're required to keep records for all monetary contributions, no matter how small. The best approach is to obtain written documentation for every donation.

2. Charge it. The deductible amount for 2013 includes charitable gifts charged by credit card before the end of the year. This covers online contributions using a credit card account. So you can claim a current deduction for donations made as late as December 31.

3. Give away appreciated stock. Generally, you can deduct the fair market value (FMV) of capital gain property owned longer than one year. For instance, if you acquired stock ten years ago for $1,000 and it's now worth $5,000, you can deduct the full $5,000. The appreciation in value isn't taxed.

4. Sell depreciated stock. Conversely, it usually doesn't make sense to donate stock that has declined in value, because you won't receive any tax benefit for the loss. Instead, you might sell the stock and donate the proceeds. This entitles you to a capital loss on your 2013 return plus the charitable deduction.

5. Clean out the storage space. The tax law permits you to deduct charitable gifts of used clothing and household goods that are still in "good used condition or better." Don't be so quick to discard items that can be donated to charity.

6. Donate a car. The deduction for a donated vehicle valued above $500 is generally limited to its resale amount. However, if the charity uses the vehicle for its tax-exempt purposes, you may be able to deduct its fair market value.

Plan for the return of some tax break phase-outs

Are you familiar with PEP and Pease? Though they sound like a pop duo, the terms refer to tax rules known as phase-outs that can impact how much federal income tax you owe.

Phase-outs are reductions in the amount of deductions, credits, and other breaks you can claim on your tax return. Though generally based on adjusted gross income, phase-outs vary in rate, amount, and how they're calculated.

Here's an overview of PEP and Pease, two tax breaks that are once again subject to phase-out this year.

* Personal exemption phase-out (PEP). If you're married filing jointly for 2013 and your income exceeds $300,000, the PEP will reduce the amount you claim for yourself, your spouse, and your dependents.

The personal exemption for 2013 is $3,900. But when PEP applies and your income increases, your deduction is reduced accordingly.

* Itemized deduction phase-out. You probably already know that some itemized deductions are limited. For instance, to claim a deduction for medical expenses, your out-of-pocket costs for this year have to exceed 10% of adjusted gross income (AGI). This threshold remains at 7.5% of AGI if you are 65 or older. Miscellaneous itemized deductions, such as unreimbursed employee business expenses, are limited to amounts over 2% of AGI.

* There's also an additional phase-out called the Pease provision that limits the amount of total itemized deductions - after the above reductions. For 2013, Pease kicks in when your income exceeds $300,000 ($150,000 if you're married filing separately).

Other phase-outs limit the amount and deductibility of IRA contributions; the education, adoption, and childcare credits; and the alternative minimum tax exemption. Please call for a review of how phase-outs affect you and what you might be able to do to avoid them.